It’s the oldest rule in the investing book: Buy low and sell high. But it isn’t easy, even for a Wall Street celebrity like Nelson Peltz, who acknowledges a pang of regret on a high-profile trade.
Trian Fund Management, the activist firm he co-founded, took a $2.5 billion stake in General Electric Co. in late 2015, when the stock was hovering in the mid-$20s. Both companies trumpeted the move as an endorsement of a stagnant U.S. icon ready to flourish again.
Instead, GE has been battered by operational missteps, weak cash flow and crippling debt. Two chief executive officers have left since Trian invested, and the current boss has spent his first year selling assets, slashing the dividend and trying to shore up the balance sheet. While GE briefly rose in the months following Trian’s investment, peaking near $32 a share in July 2016, it has fallen as much as 80% from there.
“We bought the stock at $23, right. It went up to $32, we sold a third of our position,” Peltz said Thursday at CNBC’s Delivering Alpha conference. “That was our big mistake. We should have sold three-thirds of our position.”
GE shares (GE) traded a bit higher at $9.43 early Friday in New York, extending a moderate rally since shares tumbled in December to the lowest in almost a decade. Peltz called current GE CEO Larry Culp a “star.” And he touted changes on the board, where Trian won representation in 2017.
Whether there will ever be a chance to sell GE at a higher price remains to be seen.
“We make a mistake about once every 25 years,” Peltz said. “So you guys can relax for another 22 years, everything is going to be cool.”