If Market Correction fizzles Buy GE

Stocks are all falling today and the market is taking General Electric Company (GE)  down along with it.  GE shares have dropped 6.34% in the past 5 days. 

That might not sound like much, but it's a huge loss in paper money with a drop in $12.69 billion in market cap erased by a loss of $1.20 a share.  Should this correction not take hold and turn out to be a 'shake-out' of sorts, big money is going to come in fast.  That means GE could bounce back to at least what it was last week, trading at around the $20 level.

GE shares have traded between $14.02 and $21 over the past 12 months.  Today GE is at $18.75, down 2.34% with a P/E Ratio of 15.7 and EPS of 1.23.  It also pays out a 3.36% annual dividend yield.

Made in the USA

GE has been one of the major companies leading the charge to bring manufacturing jobs back home to the U.S or 'reshoring'. Since 2009, the company has created 13,500 new jobs in this country with 11,000 of them in manufacturing. Overall, the United States has added 429,000 factory jobs in the past two years, barely replacing a fifth of the jobs lost during the recession.

And now GE is placing a $1 billion reshoring bet on the company's domestic appliance business. This business, together with its lighting business, accounts for 6 percent of General Electric's revenues.

GE is moving its appliances business back onshore because it found out, in the words of the chief executive of GE Appliances Chip Blakenship, that “over time [offshoring] wasn't that sustainable a business model” after enjoying the one-off cost benefit. These benefits have largely disappeared as wages have risen in China. When adjusted for productivity, U.S. wages will be only 2.5 times Chinese wages versus 4.6 times in 2006, according to the Boston Consulting Group. In addition, GE found that an extended supply chain generates some of its own problems due to higher energy costs.

Mastery Bottom Line

We like that GE is making a move to bring work back to the US. It may be tough for GE to make this move, however, GE's management will make it happen.

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