Big Stock Buys: GE, Tesla, Apple, Netflix

Guggenheim Capital, through subsidiaries including investment manager Guggenheim Partners, oversees $42 billion in U.S.-traded equities.

Guggenheim was founded by the same family that made its fortune mining and later established foundations and built art museums world-wide.

Speaking of art, one way of framing investment moves Guggenheim made in the fourth quarter are by examining its relatively large purchases of stock in both General Electric (ticker: GE) and Baker Hughes a GE Company (BHGE), GE’s publicly traded joint venture. Guggenheim also bought more Tesla (TSLA), Apple (AAPL) and Netflix (NFLX).

Guggenheim raised its holdings in GE by 50% by buying 1.2 million more shares in the fourth quarter and ending the year with 3.7 million shares of the complicated conglomerate. As GE’s stock careened downhill to its ultimate 50% loss in 2017, value investors had the shares in their sights. Many bought, particularly in the second half. Even GE bought its own stock as an investment position, the first time since 2006. Alas, the new year exposed more challenges. A regulatory probe and speculation the company could be booted from the Dow Jones Industrial Average have emerged as issues, and we’re only two months into the year. In our recent bearish cover story, we noted that GE’s Chief Executive John Flannery sees 2018 as a “reset year.” If the stock can’t log a gain for this year, can it at least not end in the red again? Shares are down 16% so far in 2018 through Friday’s close.

GE owns 62.5% of Baker Hughes, which is also down in double digits in 2018 with a loss of 11% after last year’s 29% drop, excluding dividends and on a pro forma basis, as the oil-and-gas-services joint venture wasn’t completed until July. We’ve noted that one analyst called for GE to buy all of Baker Hughes rather than selling its majority stake. Maybe that makes sense if Baker Hughes shares have bottomed but our GE story noted that “[t]he financial performance of the combined enterprise has been disappointing since the combination.” In any case, Guggenheim bought 745,000 more shares of Baker Hughes in the fourth quarter, raising its holdings to 1.9 million shares.

Tesla shares bolted 46% in 2017 and are up another 13% so far in 2018, despite production delays of the Model 3 sedan. However, the maker of electric vehicles has recently began taking orders from a reservation list of that model, suggesting the manufacturing hiccups are smoothing out. Guggenheim bought 7,700 more Tesla shares in the fourth quarter, ending 2017 with 44,300 shares.

Guggenheim raised its stake in Apple by 18% in the fourth quarter to 2.4 million shares. Apple ended 2017 with a 48% gain, and Guggenheim’s trade is still paying off as the shares have gained another 4% year to date after recovering from market turbulence earlier this month. What’s Apple’s secret to success? CEO Tim Cook says, “Customers are jewels.”

Netflix certainly had a lot of gems in its streaming library, including hits such as Stranger Things, Orange Is the New Black and 13 Reasons Why. Shares surged 55% in 2017 and then the trend steepened; Netflix is already up another 49% so far in 2018. Subscriber growth outside the U.S. is a major key to growth. Guggenheim bought 96,800 more Netflix shares, raising its stake to 501,700 shares.

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