General Electric is the 'ultimate show-me' industrials stock, strategist warns

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Why this investing pro says GE could be a short-term play

A one-time beaten-down laggard of the industrials sector has renewed life.

General Electric shares have raced nearly 30% higher during the past three months, topping the XLI industrials ETF over that stretch, as its turnaround efforts take root.

John Petrides, portfolio manager at Tocqueville Asset Management, needs more proof before he has faith in a comeback.

"GE is the ultimate show-me story, and we're beyond hope. Hope was when [CEO] Larry Culp took over and now we're in the 'can they execute?' [stage], and they need to do it over a series of quarters. If you're getting on the GE bus at this point, you're doing it for the long term, not for a quarterly move, and I think we need to see more time for this to play out to be convinced," Petrides said Thursday on CNBC's "Trading Nation." 

Culp was named as chief executive in October 2018, taking over for long-time GE executive John Flannery. Since Culp was named, shares have risen more than 8%. It closed Thursday's trading at $11.77.

There could still be a short-term play here, said Ascent Wealth Partners managing director and technical analyst Todd Gordon.

"$7.05 is the all-time low in this stock, we've bounced off it," Gordon said during the same segment. "We've seen a nice bid from that Morgan Stanley note. I actually did add it to my position here. Right now, they have an upside target of about $14 here. I think that is well within reason."

Morgan Stanley upgraded to overweight on Thursday based on improvements in GE's power business and strength in its aviation unit. Analysts raised their price target to $14, but kept $9 as a bear case.

"Morgan put out a $9 fundamental floor in the stock right here. I actually think you don't need to give it much below $11," said Gordon.

Petrides says a pickup in the global economy could help bolster GE's bull case.

"We are in what has been a global industrial recession. So, the U.S. consumer has been holding the global economy up, and there's hope because the 'phase one' deal with China was struck. That's going to help the industrial economy out, we need to see that play out in the numbers," Petrides added.

Disclosure: Gordon and Petrides have positions in GE.

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