General Electric (GE) has been busy lately. With over a million shares traded daily, General Electric is the fourth biggest mover on the NASDAQ 100 After Hours Indicator's most active stocks list, trailing Bank of America (BAC), Sirius XM Radio (SIRI), and Avon Products (AVP).
As for the larger picture, General Electric is doing pretty well right now. Its 52-week range is from $14.02 to $21 and shares are sitting near the top of that range at the moment, after having taken a long plunge from August 2011 through December 2011.
General Electric is marketing itself well to Washington and it will continue to reap rewards. General Electric has made some less-than-flattering headlines in the past for having successfully lobbied for significant tax breaks, allowing it to pay very low rates. This is all well and good for the pocket-book of the management, but it does not look good to the general public and bad publicity is never good for stock prices. For GE, the company received $4.7 billion in tax rebates over the past three years and paid out a mere $84 million in lobbying expenses. This sort of action has allowed the company to pay only 2.3% in taxes on its $81.2 billion in profits over in the past decade. This is much lower than the marginal corporate tax rate or 35%.
The company's approach to savvy marketing now fully includes green technology. General Electric is partnering up with the North American arm of Italy's Enel Green Power, to run one of Oklahoma's largest wind projects. The company expects initial building costs to run at approximately $375 million at its Hunter, Oklahoma location. General Electric owns 51% of this project. This undertaking is one of many environmentally conscious projects in which General Electric takes part. I think that GE has a significant leg up over competitors in the green space. Previously it has held a stake in similar wind projects, in particular, in Smoky Hills, Kansas, and Scurry County, Texas. The company is a solid operator in the wind energy space.
Additionally, I am pleased to see in the latest two earnings reports that the company is returning to its industrial roots, including aircraft technology. This movement away from a "financial GE" is good for investors. Specifically, General Electric Aviation is working on producing more fuel-efficient engines for airplanes. It will sell 19 engines to Kenya Airways for its fleet of Boeing 787 Dreamliners. These aircrafts are designed to reduce increase the fuel efficiency of air travel. This is not enough of an improvement to allow the American Federal Aviation Administration to sign off on direct flights between Kenya and the United States, but it is a step in the right direction.
General Electric Healthcare is working on the development of colorectal lung and liver oncology drugs. It recently announced a licensing agreement with Dyax (DYAX) for the development and commercialization of peptides binding to c-Met. This agreement provides upfront, milestone, and royalty payments to Dyax. The research that this will allow for will open the door for huge strides in the aforementioned drugs. This is a strong partnership that is very important to General Electric because its healthcare division is likely to be a relatively bigger contributor to earnings over the next few years than it has in the past.
All things considered, General Electric is a good buy right now because of its capacity for innovation and savvy marketing. At some point it is likely that the company's effective tax rate will increase and compress the earnings multiple that investors are willing to assign to shares. I do not believe that will happen during political terms in which GE is so embedded. Thus, investors should not discount tax changes into the stock price as this will not have a serious impact on the company's outlook.