- GE’s stock has been struggling, and short sellers are majorly profiting off of the company’s shortcomings.
- Despite being rocked by leadership changes and a gas turbine failure, current GE shareholders should hold on to their shares.
- Short selling is best left to stock market trading veterans.
Despite this decline, by taking gambles on GE’s stock price, short sellers have already profited some $673 million this year, according to StockNews.com. Before you dive into figuring out how they did it, the first question you should ask is whether you really should be short selling any stock at all — it’s not the right move for every investor.
Click to read more about former GE CEO Jack Welch’s tips for climbing the career ladder.
How Does Short Selling Work?
Short selling a stock is based on the belief that a stock’s price will imminently drop, so advanced traders will borrow a certain number of shares of a stock only to turn around to sell them. If and when the stock’s price has gone down, the trader then buys the stocks, essentially replacing the shares they borrowed.
Considered unpopular in some trading circles, notorious short sellers — or “shorts,” as they’re known — profit off of poor-performing companies and bet against the American stock market. Shorts also have the ability to turn the slightest market instability into full-blown panic. Short selling isn’t for the faint of heart, and the risk-averse are best off leaving the risky investing behavior to the pros.
What Short Sellers Saw in GE — and See in Other Industries
If you look at market trends, it would be prudent for current GE investors to hold on to their shares. Experts and analysts derive confidence from new CEO Larry Culp, who has demonstrated success in reviving tech company Danaher.
Experienced investors keenly attuned to the stock market have watched GE’s stock decline week to week, however. The company has been plagued by debt and lackluster performance, and a recent gas turbine failure in Texas and the change in GE’s leadership haven’t offered any stability to current or potential investors. These issues could be, in part, why investors have been short selling GE’s stock.
For investors wanting to make a quick buck in the market, you should probably look to certain struggling industries that are predicted to bottom out this year — and seek professional investment advice if you aren’t an experienced investor. Independent oil and gas, retail real estate, and certain traditional and apparel retailers are all nearing major sell-off, according to analysts, which could make them ripe for a potential short sale.
Shares of GE stock could be on the upswing, however, reinvigorated by Culp, who is expected to speed up the company’s recovery. If you’re not experienced at short selling, you might want to hold on to your stock and ride the most recent changes out.
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