GE Remains A Defensive Play

Jan.20.12 | About: General Electric (GE)

GE (NYSE:GE) is down a little after coming up a little short on revenue, which it blamed on the weak euro.

GE has been in transition for a decade now, since Jeff Immelt became CEO, slowly reducing its reliance on finance, slowing increasing its reliance on products. Immelt came to the CEO job from what's now GE Healthcare, and his father ran the aircraft engines unit. It's where his heart is, for better or for worse.

For investors, it's mostly been for worse. GE shares never recovered from the 2000 market crash, and now trade at a 60% discount to where they were when Immelt became CEO. But Immelt is not for turning. And GE is not for firing. Now 55, he's going to be running the company for another decade.

I still own GE although I lightened my load a few years ago, taking a loss. GE is not a trading stock, it is not very volatile. But even at current prices it carries a 3.55% yield. That's better than a 30-year bond, and it's going to be almost as reliable.

That's because GE makes stuff. It ran Microsoft out of the healthcare business, and it's going to benefit from that sweet, sweet stimulus cash. Its jet engine operations are a regular money machine, and it's in a sweet spot on energy, with natural gas turbines tied to helping renewable energy get on the grid.

So GE is in some nice growth markets, well-positioned. But appliance markets, turbine markets, and health IT are not sexy. Results will rise and fall mainly based on external factors - like Europe. You have minimal downside risk and decent upside momentum, but remember this company remains bigger, in terms of sales volume, than even Apple Inc. (NASDAQ:AAPL) so the needle is hard to move.

Immelt's GE is a defensive play, but you like some of that in a balanced portfolio. My stake is down to a reasonable level, so I'm going to sit tight on it. When Immelt and I retire (we're about the same age) we'll be comfortable with it, and so will you.

GE won't make you rich, but at these levels it won't hurt you, either.

Disclosure: I am long GE.