Nelson Peltz’s Trian Fund Management LP acquired a $2.5 billion stake in General Electric Co., sending the shares up the most in almost six months, as the activist investor takes advantage of the company’s tilt back to manufacturing.

GE has announced $97 billion in financial-asset divestitures this year, including a $2.5 billion deal Monday to sell its corporate-aircraft financing portfolio to Global Jet Capital. Shrinking the GE Capital lending arm will let GE shed its designation as a systemically important financial institution, boosting the prospect of share buybacks, said Nick Heymann, a William Blair & Co. analyst.

“Nelson Peltz, like others, clearly believes the financial-services business is a bit of a black box,” Heymann said in a telephone interview. “They viewed GE’s exit from that business as a positive.”

Trian’s investment is the firm’s largest and makes it GE’s ninth-biggest shareholder, according to data compiled by Bloomberg. The New York-based fund said it met over the past few months with leaders of GE’s business units in a series of site visits before completing the investment. GE shares may reach $40 to $45 by the end of 2017, Trian said Monday.

“We invested in GE because it is undervalued and under-appreciated by the market despite what we believe is a transformation that will allow its world-class industrial businesses to drive attractive shareowner returns,” Peltz said in the statement.

David Fuller's view

General Electric is a sleeper which has not moved in the last two years, despite an initially positive response to CEO Jeff Immelt’s decision to sell much of GE’s Capital lending division last April.  This has taken time due to the soft global economy and stock market correction that has occurred. 

Nevertheless, the divestitures are underway and likely to increase, judging from the article above.  Moreover, Trian’s interest should now help to revive more than fleeting interest in General Electric (est p/e 20.44 & yield 3.46%), not least as weak holders will have been shaken out by the sharp, albeit temporary, slump in August.

(See also this second article released by Bloomberg this evening: How Peltz’s $2.5 Billion Investment Will Make GE Hurry Up) 

(Disclosure: I still hold some December futures contract longs in GE which I purchased last April.)