It is time to consider General Electric (NYSE:GE) over Honeywell (NYSE:HON). A little background on prior suggestions is covered below.
Why was there a long GE, short Honeywell pick?
In June 2015, Seeking Alpha had a paired trade contest. A paired trade is long one issue and short another issue. The June 16, 2015, article picked General Electric for the long side and Honeywell for the short side. The basic premise was that GE was deleveraging and that would benefit GE shareholders.
The paired trade is more of a long-term or macro call, based upon the deleveraging at GE. Honeywell is a very good firm, however, based upon relative valuation metrics discussed above GE appears to be cheaper of the two issues.
The GE deleverage thesis changed:
In December 2015, it was suggested investors might wish to exit or hedge the long GE short HON trade, as GE was increasing leverage, thanks to its decision to repurchase shares. At this time, GE's total return was 13.53% versus Honeywell's 1.18%.
