"The opposite of bravery is not cowardice but conformity." - Robert Anthony
To a seasoned investor the market is starting to resemble the beginning of the Battle of Sterling in the academy award winning movie Braveheart. We are at the point in the market and the movie where the heavy English cavalry is about to enter a full charge and just coming over a little ridge.
Experienced investors are holding firmly and waiting to lift their spears and start the counterattack at the appropriate time. At this point in the battle concerns are on whether the brunt of the army (the retail investor who just came back into the market in a big way in 2013) will not break and run and whether the Nobles (The Federal Reserve under new leadership) can be trusted to emerge behind the enemy lines if the battle does start to become a rout.
Maybe not a perfect analogy but one that seems appropriate as the market is having its first major two-day selloff in quite some time. As I speculated on early in the New Year, it was quite likely the first hiccup in our markets in 2014 would come from emerging markets.
This has indeed been the case as worries around China, Argentina and Turkey have been primary triggers for the ~3% decline over the past 48 hours. I also stated in that article that this will eventually begat a tremendous opportunity to buy the emerging markets at a huge discount.
However, we are not quite there yet. In the meantime, I am starting to slowly nibble at high yield blue chips that have pulled back to more reasonable levels in 2014. General Electric (NYSE:GE) looks like it is a buying opportunity after pulling back ~10% from recent highs. This industrial blue chip has been in my income portfolio for quite some time and I added some additional shares today in late afternoon trading.
With the stock's recent pullback, the dividend has gone from a 3% yield to 3.3%, more than 50 basis points over the 10-year treasury yield. In addition, the stock has gone from selling at the overall market multiple to selling at a 7% to 10% discount to that multiple.
General Electric's management at Davos has reemphasized this week that the global economy is getting better, not worse. Nothing that has happened over the last couple of days that is likely to change that outlook. This is backed up by the company's record order backlog reported during its last quarterly earnings report which hit the wires late last week.
Finally, the company looks set to spin off its U.S. consumer finance unit in the first half of this year. This should be another positive catalyst on the company's journey to a more pure play industrial concern, which is awarded significantly higher multiples in the market than financial entities.
Patient long-term value and income investors should consider picking up some General Electric on this recent bout of volatility in the market. The stock offers a solid yield, the company continues to execute against its strategic plan to be more of a global industrial juggernaut and the stock is now trading at a slight discount to the overall market as well. BUY.
Disclosure: I am long GE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.