While Meyer isn't alone in his view of GE's executive compensation, value investors see much potential in a stock that is up nearly 80% since the summer of 2009. The recent negative headlines, combined with a 57% drop over the past decade since Immelt took over from management guru Jack Welch, has made GE a favorite among those long-term investors.
"How can you be happy if you bought at the beginning of 2007 at $37? I can understand people's frustrations that way," says Russell Croft, manager of the Croft Value Fund (CLVFX).
Croft's fund has $426 million in assets with a 1.4% weighting for GE. "It hasn't been the best stock if you've owned it for ages, but over the last year or so it's had a nice return."
GE reported first-quarter financial results Thursday, with operating earnings climbing 58% to $3.6 billion, or 33 cents a share. The industrial conglomerate also raised its quarterly dividend by 1 cent a share to 15 cents.
Croft, though, says investors in GE shouldn't put too much weight on one quarter of performance. "Going into this quarter, we're not traders. We're investors," he says. "We can't get lost in the short-term noise. We'd go crazy. Every quarter, though, we get further along with clarity in GE Capital."
Robert MacDonald, associate portfolio manager with the Thornburg Value Fund (TVAFX), also counts GE as a top holding. The $4.8 billion fund has nearly 3% devoted to GE shares, as the company has fallen so out of favor, he says.
"Look at what GE used to be and how it was thought of in the late 1990s. It was considered the best company in the world" under Welch, he says.
"Over the last decade or so, it has gone from the top to the bottom. The truth is closer to the top than the bottom. We're at a point now where the market will start to realize that. The tax issue, executive comp, and Japan — those are things that will get a lot of coverage. But in the investment community, I don't think it really impacts the ultimate value of the stock."
While investors like Meyer criticize Immelt and GE management as overpaid given the company's underperformance, MacDonald says that he is encouraged by GE's recent execution.
"What's most important to me as a shareholder is that Immelt and the management team execute," MacDonald says. "If you listen to what Immelt laid out in the beginning of 2009, there was a focus on the company's core competencies. They would pay dividends, buy back stock, and be prudent with the cash they have and generate. It seems like they're doing a pretty good job of that."