A loss of 53.87% the past year for shares of General Electric Company (GE) tells a story of unusual bearish trading activity accompanying the move. The main criteria we look for when betting on upside in a stock are improving fundamentals, leading technicals and bullish trading activity in the shares, all of which GE is missing. I'll go into the fundamental picture later, but, for us, the true tell on the near-term trajectory of a stock lies in the trading activity.

Throughout 2018, GE shares have decreased in price alongside an increase in volume. This can be indicative of smart money selling shares. The bottom line here is that the manner in which a stock trades can oftentimes alert you to the forward fundamental picture more so than simply looking at a company's financials alone.

For Mapsignals, the strongest indicator of negative price momentum is obtained by measuring potential institutional selling in the shares. In 2018, GE has logged 20 of these rare signals (see chart). When we see continual bearish activity in the shares alongside troubling forward fundamentals, we take notice, as this indicates that there is a lack of demand for the shares.

In the chart below, GE is near its 52-week low. Clearly, the trend has been down all year, with a lack of demand for the shares:

Mapsignals' goal is to identify tomorrow's top stocks today. We're basically looking for outlier companies with healthy fundamentals accompanied by outsized unusual institutional trading activity. By studying these data points, we can make an educated guess as to which equities institutions are trafficking in and marry this information with fundamentally sound companies. We want the odds on our side when looking for the highest-quality stocks. The opposite is true when companies flag negative criteria, as is the case for GE.

The following are three technical areas of concern for shares of GE:

  • Year-to-date (YTD) underperformance vs. market: -57.37% vs. SPDR S&P 500 ETF (SPY)
  • YTD underperformance vs. sector: -49.98% vs. Industrial Select Sector SPDR ETF (XLI)
  • Bearish unusual trading signals

Just to show you graphically what our unusual trading activity signal looks like, have a look at all of the UI signals GE has made over the past year. As you can see, the trend indicates low demand for the shares:

Chart showing unusual activity signals made by General Electric Company (GE) stock over the past year

Now, we take it a step further and score each stock showing this activity. Below, you can see the historical times where GE made sell signals for Mapsignals, beginning in 2017. These are the lowest-rated signals in our stock universe:

Historical chart showing unusual activity signals made by General Electric Company (GE) stock

On top of a poor technical picture, one should also look under the hood to see if the fundamental picture supports a negative outlook for an investment. As you can see, GE stock has had a troubling fundamental picture over the past year:

  • Q3 2018 YoY non-GAAP EPS growth rate: -33%
  • Q3 2018 announced quarterly dividend decreased from 12 cents to 1 cent

GE is underperforming technically and lacks strong fundamentals while showing bearish institutional momentum in 2018. Until this overall picture changes, shares could remain under pressure.

The Bottom Line

GE does not meet the current criteria for a long-term investment. Given the weak earnings growth, dividend cut and multiple unusual distribution signals, this stock should face headwinds until the fundamental and technical picture brightens.

To learn more about Mapsignals' institutional signals, please visit our "About Us" page.

Disclosure: The author holds no position in GE at the time of publication.