It doesn’t feel good.
If you’ve ever been kicked out of a club, or rejected from a group you were excited to join, then you know that initial reaction usually comes with a lot of angst.
You’re upset over the decision, and sometimes rightfully so.
But a few weeks or months later, you realize it wasn’t a big deal.
In fact, it likely can be a turning point for you and your journey through life.
You can use it to fight harder, or learn to place value in more important things than a particular group. Either way, it can ultimately be good to get rejected or booted from a club.
That’s what one stock is figuring out right now.
And it’s not time to sell it. It’s time to buy this unloved stock and profit as it bounces back.
Let me explain…
The Face of the Dow
For the stock today, the situation is around a select group of just 30 stocks that combine to create the Dow Jones Industrial Average.
It’s one of the oldest indexes in the stock market, going back more than a century. And it set out to be an indicator for the U.S. economy.
The stock I am recommending today, General Electric Co. (NYSE: GE), has been the face of that index for the last 110 years.
That is, until last week.
The Dow finally kicked out struggling General Electric and filled its spot with a leading pharmacist, Walgreens Boots Alliance Inc. (Nasdaq: WBA).
Much like our initial feelings about being rejected from something, this gives investors a negative vibe as well.
But when you look at the data, this is actually good news for the stock getting the boot.
A Blessing in Disguise
Over the 12 months that followed the swap, shares in Apple fell by 14%, while shares in AT&T jumped 15%.
And this wasn’t a one-off situation either.
There’s a trend that stocks — which get removed from the Dow — tend to outperform over the next six to 12 months.
Outside of 2008’s removals, which were near the beginning of the financial crisis, many stocks go on to have great returns in the year they were removed.
Well, GM had just filed bankruptcy, so it had an extreme event take place. Bank of America was battling the ongoing credit crisis from 2008 and failed to outperform.
The rest all found solid footing after being removed.
An Excellent Investing Opportunity
When we look at General Electric, this is another company that is set to find solid ground and turn higher.
I don’t see a company that’s on the brink of bankruptcy, or being impacted by a major crisis.
Instead, this is a company that is restructuring for future growth.
It’s dumping years of bad deals and centralizing its operations around a truly industrial focus. This will reward shareholders who jump in now.
Just don’t expect shares to head straight up from here. There’s bound to be a few more bumps to iron out, and I expect volatility to remain high in the stock.
But even if the turnaround fails to bring GE back to what it was in its glory days, it will still hold a share price much higher than its current $13 a share.
So be sure to ride it out through the volatility.
As long as you are investing for the long haul, General Electric is an excellent investing opportunity right now, and one that should be in every long-term investor’s portfolio.
Chad Shoop, CMT
Editor, Automatic Profits Alert