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Here’s Why Vulcan Value Partners Sold its General Electric (GE) Shares

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  • GE

Vulcan Value Partners, an investment management firm, published its “Large Cap, Small Cap, Focus Composite, Focus Plus Composite, and All Cap Composite” third quarter 2021 investor letter – a copy of which can be downloaded here. Vulcan’s Large Cap Composite Fund delivered a 0.1% net return for the third quarter of 2021, 11.8% for the Small Cap, -0.9% for the Focus Composite Fund, -0.9% return was delivered by the Focus Plus Composite Fund, and 3.4% was gained by the All Cap Composite Fund for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Vulcan Value Partners, in its Q3 2021 investor letter, mentioned General Electric Company (NYSE: GE) and discussed its stance on the firm. General Electric Company is a Boston, Massachusetts-based multinational conglomerate company with a $112.2 billion market capitalization. GE delivered an 18.32% return since the beginning of the year, while its 12-month returns are up by 21.70%. The stock closed at $102.23 per share on November 25, 2021.

Here is what Vulcan Value Partners has to say about General Electric Company in its Q3 2021 investor letter:

"During the quarter, we sold our positions in General Electric Co. General Electric is a company we followed for a long time. In the past, we removed GE from the MVP list due to management’s poor capital allocation decisions which resulted in value instability. Larry Culp, the former CEO of Danaher, became CEO of General Electric in 2018. The company implemented a vast restructuring program to simplify the industrial side of its business, sold off non-core assets, paid down debt with the proceeds, and drastically shrunk GE Capital. These restructuring activities allowed its world-class jet engine and healthcare businesses to shine through, and improved value stability. As a result, we added the company back to the MVP list. While the pandemic negatively impacted General Electric’s aviation business in the short run, it also gave us the opportunity to buy General Electric in the second quarter of 2020 with a substantial margin of safety. GE is a good example of a competitively entrenched, yet slower growing MVP business. As its stock price rose rapidly over the last year, its value growth did not keep up, and the price to value gap closed quickly. As our margin of safety diminished, we sold our position in GE and allocated to more discounted companies."

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Carsten Reisinger / Shutterstock.com

Based on our calculations, General Electric Company (NYSE: GE) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. GE was in 53 hedge fund portfolios at the end of the third quarter of 2021, compared to 67 funds in the previous quarter. General Electric Company (NYSE: GE) delivered a -1.11% return in the past 3 months.

Disclosure: None. This article is originally published at Insider Monkey.