General Electric Company (GE), whose shares have plunged in recent months, could potentially surge more than 50% as investors realize the value of the company's individual businesses, according to comments made by Melius Research's Scott Davis and reported on by Barron's. (For more, see also: The Top 4 General Electric Shareholders.)
The company's stock is worth roughly $27 per share, stated Davis, according to Barron's. This price represents a roughly 52% increase over the price of $17.66 that General Electric shares had at the close of business on December 6, Google Finance data shows.
Analyst: GE an 'Asset Play'
The conglomerate's stock is "an asset play," claimed Davis, who stated that General Electric's aviation and health care units "are probably worth the entire value of the company," according to Barron's. He has estimated that health care unit is worth $7.34 per share, based on a price-earnings multiple of 19, while the aviation unit is worth $13.49 a share with a PE ratio of 21.
Further, General Electric has several other components, including GE Power, GE Capital, GE Lighting and Baker Hughes (BHGE), reported Barron's. "[Investors] just have to get comfortable that the rest of the assets more than offset liabilities—and we think they do," said Davis.
Major Stock Purchases
In the last several weeks, some General Electric directors have made major purchases of the company's stock, according to a second Barron's article. Francisco D'Souza, an independent director, bought 55,000 shares on November 20. John L. Flannery, chief executive and chairman of the board, bought 60,000 shares on November 15.
Further, General Electric revealed on November 13 that the company joined those buying, building up a position of 142,000 shares during the quarter that ended September 30, Barron's reported. (For more, see also: Should You Sell Your General Electric Stock?)