General Electric Company (GE), a $270.79 billion market cap company, sells products ranging from jet engines and gas turbines to consumer appliances, railroad locomotives and medical equipment.

A $2.5 billion stake

Nelson Peltz's Trian Partners announced a $2.5 billion stake in the company. As a consequence, shares of General Electric were up on the back of the news. The fund reported an equity portfolio valued at $9.03 billion at the end of the second quarter and the principal stock in the portfolio was Mondelez International (MDLZ). The fund upped its stake by 21.87% to some 48.03 million shares, valued at $1.98 billion. But after the big move, General Electric is the fund's largest position. Peltz thinks the stock could reach $40 to $45 per share by the end of 2017, which represents a 65% upside potential from the $27.2 current price.

• GE 15-Year Financial Data

• The severe warning signs with GE stocks

• The intrinsic value of GE

• Peter Lynch Chart of GE

Value for shareholders

The dividend yield is close to a five-year high, at 3.42%, and it is ranked higher than 87% of the 1,824 companies in the Global Diversified Industrials industry. While the company cut its dividend during the crisis, it has increased them in each subsequent year. As of June, the five-year dividends growth rate is at 11%. Taking into consideration that the management focuses on returning cash to shareholders as well as a track record of 32 consecutive years of dividend increases (which ended in 2009) makes me believe this trend will continue in the future, after the one-year "freeze" at the current rate of 92 cents per share annually.

On the other hand, the ROE has not done very well. The ROE for the quarter that ended in June was -4.99%.

Relative valuation

Its price-to-book ratio of 2.47x indicates a premium versus the industry median of 1.53x while the price-to-sales ratio of 1.95x is above the industry median of 0.90x. These metrics indicate that the stock is relatively overvalued, but analysts can think that the firm is undervalued because its assets are not yielding the return it should.

As we can see in the next graph, the stock price has oscillated in a range between $23 and $28 for more than two years.

Final comment

The company is transforming to a more focused industrial company after the divestiture of some financial units. The fact that Peltz is actively looking at the company leads me to think good times will come to General Electric, and fundamental investors should consider this stock for their long-term portfolios. The stock has surged almost 7% in a year-to-date basis, compared with a 3.6% loss for the Standard & Poor's 500 Index (SPY).

Further, it seems that hedge funds are bullish on the stock. At the end of June, Ken Fisher (Trades, Portfolio) upped his stake by 2% to 30.71 million shares. Moreover, Jana Partners (Trades, Portfolio) and Steven Cohen (Trades, Portfolio) have initiated new positions with 500,000 and 98,400 shares. Also bullish were other hedge fund managers like James Barrow (Trades, Portfolio), Bill Nygren (Trades, Portfolio), John Buckingham (Trades, Portfolio), Ken Fisher (Trades, Portfolio) and John Keeley (Trades, Portfolio), as well as the funds NWQ Managers (Trades, Portfolio) and First Pacific Advisors (Trades, Portfolio).

Disclosure: Omar Venerio holds no position in any stocks mentioned

This article first appeared on GuruFocus.

• GE 15-Year Financial Data

• The severe warning signs with GE stocks

• The intrinsic value of GE

• Peter Lynch Chart of GE