Why Billionaire with PERFECT Record Bought This Stock?

Buffett may be richer than Stan Druckenmiller, but he can’t claim a perfect trading record without a single down year as the founder of Duquense Family Office can.

And in its latest filings, Duquense has snapped up a company that is so far under most radars, it likely is invisible. That company is GE Vernova (GEV) and it’s got some bullish catalysts that may well be worth spending a little time on to see if they compel you to buy as they did Stan.

Key Points

• GEV’s Power, Wind, and Electrification segments all posted strong EBITDA growth.
• Effective cost-cutting has improved margins, leading to $500 million in positive cash flow.
• Backlog reached $115.5 billion, with Electrification’s segment up 35%, indicating strong future revenue potential.

Bullish Catalysts

Across all its key segments, Power, Wind, and Electrification, GEV has been growing EBITDA.

The Power segment saw a 32% increase in EBITDA year-over-year, primarily driven by improved pricing, volume, and productivity. The Wind segment, while still posting a loss, reduced its EBITDA loss by 55%, indicating progress in cost reduction and improved pricing.

Electrification’s EBITDA grew significantly from $31 million to $129 million, driven by higher volumes and better pricing in Grid Solutions and Power Conversion. That same segment saw strong demand, with revenues up by 19% year-over-year and is benefiting from the global push for grid expansion and modernization, which is expected to continue driving demand.

The growth in orders, particularly for large-scale transmission-related equipment, and the development of new technologies like grid-forming synchronous compensators and SF6-free switchgears means GEV stands on the cusp of perhaps multi-year growth.

But wait, there’s more.

Operating Costs Are Falling

Management has been actively reducing operating costs through restructuring programs and cost reduction initiatives and the results are already plain to see, particularly in the Wind segment, where the impact of cost reduction activities has contributed to the significant reduction in EBITDA losses.

Stan clearly expects this trend of cost optimization to benefit the company’s margins moving forward. Where the evidence of improvements will be seen is cash flows, where the company reported positive cash flows from operating activities of $500 million for the first six months of 2024, a substantial improvement compared to the negative cash flows in the same period of 2023.

This was driven by higher net income, improved working capital management, and significant down payments on large projects in Electrification and Power segments.

A final bullish tailwind can be seen in the company’s remaining performance obligations, which stood at $115.5 billion as of June 30, 2024, reflecting a stable and growing backlog of orders.

Notably, the Electrification segment’s RPO grew by 35% year-over-year, signaling strong demand and future revenue streams. A growing backlog is usually a very positive signal for future revenue stability and predictable growth.

Is GEV a Buy?

Analysts see upside to $197 per share in GEV share price but arguably the growing backlog, cost-cutting, margin improvement and revenue growth deserve a premium valuation, and the market hasn’t fully priced in what’s to come. At least, that seems to be the thesis Druckenmiller and his investment team are running with. Time will tell if they are right.