- General Electric’s stellar run of 2013 has ended, as shares are down 10% year-to-date.
- The smart homes and the LED market are expected to grow exponentially in the future, and General Electric is taking the right steps to benefit from it.
- The company is improving on multiple fronts, thus investors should buy it on the dip.
2013 was a very strong year for General Electric (NYSE:GE), with shares rising close to 37%. For investors who are expecting a repeat performance this year, they won't be encouraged so far, as GE shares are down 10% in 2014. But, for the long run, GE can continue its solid run and gain in a slow and steady manner. In this article, I will focus on two of the many reasons why General Electric could continue to be a solid investment going forward.
Benefiting from smart homes
Smart homes are gaining momentum as a result of technological enhancements. Programmed and cloud-managed applications are growing exponentially with a decrease in costs, and GE has already forayed into this market. Analysts believe that the market for smart homes may more than double by 2018 to be worth $71 billion. Products like security, lighting, entertainment, monitoring, energy management systems, etc. are key application areas in smart homes; and GE's product portfolio consists of these products, enabling the company to benefit from this growing market.
To tap the smart homes market, GE and Quirky have launched various products such as Spotter (multipurpose sensors), Nimbus (smart dashboard with clock), Pivot Power Genius (Smart Power Strip) and Egg minder (smart egg tray).
GE has also launched various home security products that should help it benefit from security requirements in the smart homes of tomorrow. The home monitoring system offered by GE is a package of products like security alarms, surveillance camera systems, wireless lighting system, etc. that includes GE Z wave wireless lighting and control systems
Solid state lights
Another market where GE can benefit is LED Lighting. The size of the LED market in 2014 is projected to be $8.3 billion. GE is an established brand name in conventional and LED lighting solutions, and has been spreading its footprint with solid state light solutions. LED lighting is also an important product for smart homes, improving GE's presence in smart homes further.
The LED market is on an upward trend due to various reasons. A significant reduction in energy costs with reduced greenhouse gas emissions is one of the main reasons behind the growth of LED lighting. Savings of $250 billion are expected over the next two decades by switching over to LED lights.
LED lights have also gained adoption in the automobile industry. The automobile lighting market is projected to be worth $25.36 billion by 2014. GE, with its wide range of LED lights for automobiles, can see a boost in revenue as a result going forward. Moreover, various automobile manufacturers have started adapting to LED lights due to low energy consumption.
Moreover, the following can be some of the reasons that can boost LED lighting sales for GE in 2014.
Price strategy: Reduced price stimulates demand for LED lights. GE is already retailing the 60-watt equivalent LED bulb at $11. With technological enhancements and the introduction of cost saving initiatives, GE can always be a winner in the price war and remain a cut above the competitors.
Government subsidies: GE LED lamps have obtained Energy Star ratings that should help it benefit from various government subsidies. In North America, LED lamps that are covered under the Energy Star rebate have witnessed rapid growth. In 2013, 74% of the U.S. was covered by an Active Lighting Rebate Program, giving GE a solid runway for growth.
Intelligent lighting solutions: GE already has collaborated with the government for providing intelligent outdoor lights. This year, the city of San Diego collaborated with GE and anticipates delivering total energy savings of $250,000 to the local government.
Acquisitions & channel partners: In the past, GE has either acquired or joined hands with various LED lighting companies and LED fixtures manufacturers. These acquisitions and partnerships should benefit GE in establishing a wider footprint and generate new customers to boost sales.
Brand image: This goes by default for a company which is over 100-years-old, has a global footprint, and a wide portfolio of products and services.
GE looks like a terrific investment from all angles. The company has a strong dividend yield of 3.50%, a cheap trailing P/E of 20, and is foraying into growth markets such as smart homes, industrial internet, and LED lighting. So, investors looking for a safe and sound way to benefit from different growth markets should definitely take a look at GE.