Over the last 10 years, shares of General Electric Company (GE) stock have badly trailed the returns of the S&P 500. The S&P is up 62% over that time, while one share of GE stock is actually worth 13% less than it was ten years ago.
Performance over the last five years is better — GE stock barely trails the S&P — and within the last year shares of the industrial conglomerate are up 7%, beating the -3% returns of the benchmark index by a full 10 percentage points.
CEO Jeffrey Immelt plans to keep that recent comeback story alive, as he wheels and deals the company into a new-look 21st century – one that’s global, digital and, yes, political.
Immelt embraced that dynamic yesterday, agreeing to invest $1.4 billion on projects in Saudi Arabia in what the executive feels should be a great long-term decision for GE stock owners.
GE Stock: Still Pivoting From Finance
As most long-time GE investors know, the reason GE stock underperformed the market so terribly over the last 10 years was the near-devastating losses that GE Capital, General Electric’s financial arm, suffered during the financial crisis.
After letting GE Capital get back on its feet, Immelt decided to get rid of the GE Capital assets last year, and GE stock owners were mighty pleased to hear that, especially since the asset sales amounted to $104 billion.
Now, GE is investing its spoils, and that includes the $1.4 billion it committed to invest in Saudi Arabia, $1 billion of which will be invested alongside an entity belonging to the royal order called Saudi Arabian Industrial Investments Co.
That investment will focus on industry and manufacturing projects in the country, which is trying to diversify away from its crippling dependence on oil. The other $400 million will go into a manufacturing facility for the marine and energy industry, which should ideally be open by 2020 and provide 2,000-plus jobs.
GE will also invest in other projects that focus on areas like aviation repair, digital services for factories, and manufacturing LED lights. So why should GE stock owners give a hoot?
Well, some of the language Immelt tossed around today should give GE stock owners some idea of how important ex-U.S. deals will be to General Electric in the century ahead. Immelt said the company wanted to expand its presence in Saudi Arabia in a “new and visionary way,” according to an Associated Press report.
In a way, GE’s deal is indeed similar to Apple Inc.’s (AAPL) decision to invest $1 billion in the Chinese ride-hailing service Didi Chuxing; the move was seen as a largely strategic attempt to get on the good side of the Chinese government for the sake of doing future business in the country.
With General Electric also allegedly poaching two of Apple’s top software engineers away from the Cupertino giant, it’s pretty clear GE stock owners should get used to the new-look GE.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
