General Electric: 5 Reasons to Sell - TheStreet

By Jim Woods of InvestorPlace



) -

General Electric

(GE) - Get Report

stock was well known to buy-and-hold investors as a cornerstone stock for decades. But for most of the 21st century GE shares have been dead money. After the financial crisis of 2008, things got real bad for GE, and at the height of the global economic meltdown, the stock was one of the biggest losers on the Street.

In March 2009, GE stock hit a historic intraday low of just $5.73. With shares now trading around $15, some traders are saying General Electric is a buy. Don't believe it. There are more reasons to sell this stock than to buy or hold. Here are the top five:

General Electric shares under heavy selling pressure.

After a nice run higher in the first four months of the year, GE shares have come under heavy selling pressure. The stock reached $19.50 in mid-April, but since then the shares are down nearly 24%. With the stock now trading below both the short-term, 50-day, and long-term, 200-day moving averages, the bear is firmly in control of GE.

Weak revenue despite GE earnings beat.

On April 16, GE reported what can be generously described as a mixed bag of first-quarter earnings numbers. The company did report a profit of 21 cents a share in the period, and that number did top consensus forecasts for a profit of 17 cents a share. But that bottom-line GE earnings number was down 32% from the same period a year ago, and the revenue in Q1 fell 5% to $36.6 billion, well below the $37.3 billion forecast. General Electric made the numbers work on cost cutting, but how much longer can they beat the Street simply by cost reduction?

More From Investor Place

7 Safe Stocks for June

Five Small Caps Ripe for a Takeover

10 of the Worst Stocks Out There

General Electric orders have slowed.

While the overall slowdown in revenue is bad for GE stock, the picture appears even worse when we dig through the numbers. There was a big decline in new equipment orders in the company's energy segment, which was down 24%, and in the aviation segment orders were down 21%. General Electric did see an 8% gain in healthcare equipment orders, but overall new equipment orders were down 10%.

GE dividend yield flat.

At the company's annual shareholder meeting, CEO Jeff Immelt said, "The clouds are breaking and the forecast ahead of us is promising." Then Mr. Immelt told shareholders, "Your dividend is going up again soon." What does "soon" mean? According to GE, soon means not until 2011. If the stock didn't raise its dividend yield at the last annual meeting, it likely won't for the rest of 2010. With all of the companies out there already increasing their dividend, you would think GE could as well. That may be a sign that General Electric isn't doing as well as its competitors. And considering the company slashed its dividend during the recession, it has a long way to go to make things up to income-oriented investors.

GE Capital scales back.

After nine straight quarters of profit declines, GE has said it has learned its lesson and is determined to streamline operations and focus on its core industrial business. That means that what was once one of its most profitable businesses, GE Capital, is being scaled back. The company's finance arm now is expected to generate 30-40% of overall corporate profits, which would be down substantially from years past. Can this revenue shortfall from GE Capital be replaced by its industrial businesses? So far, the answer is no.

On July 16, we'll find out if GE's earnings can spark new interest in the shares. If the numbers aren't stellar, it could mean much more downside for the industrial giant. Unless you're planning to hold GE stock until retirement, you're probably better off selling this blue chip.

More From Investor Place

7 Safe Stocks for June

Five Small Caps Ripe for a Takeover

10 of the Worst Stocks Out There