Market Playground

By Jim Van Meerten

You’ve all heard the old saying what’s good for the Generals is good for the country. That old saying has never been more true than it is right now. Looking at where General Electric Company (NYSE:GE) is making their money is almost a mirror of where the US economy is making its money. GE seems to be having a good year in its financing units and turning around its energy infrastructure units.They are making larger marketing plays in India, China and Australia. Their aviation spare parts unit is making real progress

With a wide array of business units in so many different business segments GE is a true conglomerate. The only reason to invest in a true conglomerate is that you believe it’s management is more capable than the general business manager at large. Let’s look at the numbers before we make a decision. If you had owned this stock over the past year you’d be down about 23% as this Barchart provided graph shows:

General Electric Company (GE) operates as a technology, service, and finance company worldwide. The company’s Energy Infrastructure segment offers wind, gas, and steam turbines and generators; combined-cycle systems; nuclear reactors, fuel, and support services; and motors and control systems, as well as provides water treatment solutions. This segment also provides integrated electrical equipment and systems to distribute, protect, and control energy and equipment; and oil and gas equipment, including surface and subsea drilling and production systems, equipment for floating production platforms, compressors, turbines, turbo expanders, high pressure reactors, industrial power generation, and auxiliary equipment.

Its Aviation segment produces and sells jet engines, turboprop and turbo shaft engines, and related replacement parts for use in military and commercial aircraft, as well as provides maintenance, component repair, and overhaul services.

The company’s Healthcare segment provides medical imaging and information technologies, medical diagnostics, patient monitoring systems, disease research, drug discovery, and biopharmaceutical manufacturing technologies, as well as remote diagnostic and repair services. Its Transportation segment provides technology solutions for customers in various industries, including railroad, transit, mining, oil and gas, power generation, and marine.

The company’s GE Capital segment offers commercial loans and leases, fleet management, financial programs, home loans, credit cards, personal loans, and other financial services. Its Home and Business Solutions segment provides refrigerators; freezers; electric and gas ranges; cooktops; dishwashers; clothes  washers and dryers; microwave ovens; room air conditioners; and residential water systems primarily under the GE Monogram, GE Profile, GE, Hotpoint, and GE Café brand names. The company was founded in 1892 and is based in Fairfield, Connecticut (Yahoo Finance profile)

Factors to Consider

Barchart technical factors:

• 80% Barchart short term technical buy signal
• Trend Spotter technical buy signal
• Above its 20 and 50 day moving average but still below its 100 day moving average
• Although the stock is about 23% off its one year high it has gone up 9.47% in just the last month
• Relative Strength Index is 57.59% and rising
• Barchart computes a technical support level at 16.18
• Recently traded at 16.53 with a 50 day moving average of 15.79

Fundamental factors:

• This is a widely followed stock on Wall Street and brokerage analysts think revenue will be down by 1.30% this year and only up slightly by .90% next year
• Analysts project cost savings will allow earnings to increase by 23.20% this year, and additional 13..80% next year and continue to increase by an annual rate of 14.74% for at least 5 years out.
• Based mainly on the earnings consensus the brokerage analysts issued 4 strong buy, 9 buy and 4 hold recommendations for their clients to consider
• The market has a P/E ration of 14 and a dividend rate of 2.3% and GE compares favorably with a P/E ration of 12.89 and a dividend rate of 3.61%
• That dividend rate looks fairly secure being about 45% of expected earnings

General investor interests:

• With 16,256 readers of Motley Fool giving an opinion on this stock it will be on many investors watch lists
• Those readers who voted bet 94% that the stock will beat the market
• The more experienced All Stars voted 95% for the same result
• Fool follows Wall Street columnists and found that the last 34 articles were all positive
• For those of you who like names some picking the stock to prosper were Jim Cramer, Chris Davis, Tobin Smith and Wayne Rogers.

Competitors are hard to compare when it comes to true conglomerates like GE but some similar companies are down further like Siemens (SI) down 9% in the last year or Emerson Electric (EMR) down 13% and Koninklijke Philips (PHG) down 34%:

Summary:

General Electric (GE) is a true conglomerate and an investment in this stock is an investment in the economy and the management of the company.  I know I’ll take heat on this comment but I think the management of GE is slightly better than the average manager in the overall country.  In the years ahead I think the stock will do better than the average stock and if earnings projections are met an investor at this price could see an annual total return in the area of 25% – 29% for at least the next 5 years.

Jim Van Meerten is a professional investor with over 40 year experience in investing in stocks, mutual funds and ETFs. He shares his knowledge on Barchart in his daily blogs – Barchart Portfolio. Jim Van Meerten is a Marketocracy Master.