Trading Nation

Any GE rebound is nothing more than a ‘dead cat bounce,’ market watcher says

Trading Nation: GE positive for month

After its best week in more than a month, General Electric started Monday in the red. To those expecting a more prolonged rebound, think again, says one market watcher.

"If you're investing in GE right now, you're playing nothing more than a dead cat bounce," Michael Binger, senior portfolio manager at Gradient Investments, told CNBC's "Trading Nation" on Friday.

The industrial giant is in the middle of a multiyear restructuring process that could put a stop to any upward momentum, said Binger.

"They've outspent their cash flow, they've cut their dividend, they've made ill-timed acquisitions, they've layered on a ton of debt on their balance sheet," he said. "I think this is going to take a lot of time. I don't think it's investable right now."

Binger said that a number of divestitures and write-downs could right-size the business, but expects this to be a long process. On top of that, he says the Dow stock is finally paying the price for relying on GE Capital and acquired noncore businesses to help beat earnings estimates each quarter.

GE said Friday that it will take a charge of $4.24 billion for its first quarter, while profits over the past two years have been revised lower by 30 cents a share. Markets had already expected a restatement of that size.

Gina Sanchez, CEO of Chantico Global, shares a similarly bearish view on the company's growth potential.

"If you look at GE, you have a struggling transportation business, you have a mediocre power business. I mean, their aerospace servicing business is probably the best business that they have," she told CNBC's "Trading Nation."

GE enjoyed a small bounce at the end of last week, one Sanchez credits to hopes it will unload more of its assets. The company announced earlier this month that Veritas Capital has agreed to acquire a health-care technology unit from GE for $1.05 billion in cash.

Unloading assets might not be enough to fix GE's troubles, though, said Sanchez.

"I still think there's uncertainty and, quite frankly, I don't think asset dispositions are necessarily going to fix this problem," she said.

Sanchez says the likelihood of another earnings miss and dividend cut could return downward pressure to its stock. GE has missed analysts' expectations over the previous three quarters. The company also last cut its dividend in November, marking the second time it had done so since the Great Depression.

GE shares were down nearly 1 percent Monday. They closed out last week with gains of more than 3 percent, their best week in more than a month. The stock is on track for its 14th straight month of losses, its longest such losing streak ever. It remains 23 percent lower for 2018.


Disclosure: Binger and Gradient Investments do not have a position in GE.