The "Team Alpha" retirement portfolio has outperformed the overall market averages, as detailed in this article. The portfolio continues to outperform and one of the main drivers of growth is General Electric (GE). (Please review this article)
General Electric is one of the largest conglomerates on the planet and has their footprint solidly planted in just about every aspect of mankind's everyday life.
Back in mid December I wrote this article, when GE was selling for about $16.00/share. The share price as of this writing (8/16/2012) is $21.00/share. A 31% increase in 9 months is nothing to sneeze at, but I believe this could be the beginning of a new chapter for GE, which will not only benefit the company, but finally reward shareholders far more than the company has in the recent past.
General Electric In Focus
GE has been one of the more reviled companies around. The CEO, Jeff Immelt, has not created many friends outside of Washington D.C. and has alienated shareholders by reducing shareholder value. Cutting dividends, share price deterioration, and a reliance on G.E. Capital has irked far too many individual investors (not to mention institutions).
The numbers speak for themselves:
- In early 2009, GE slashed its dividend from $.31/share down to $.10/share.
- The share price dropped from $60.00/share in mid 2000, down to an incredible $8.00/share in early 2009.
- The company paid less taxes than just about every major corporation, anywhere.
- Last but not least, Immelt (and GE) embraced the candidacy of Barack Obama, and his policies by contributing nearly 70% of their campaign contribution funds to the Democratic Party, in particular, the Presidential Campaign Fund.
Not a pretty picture to be sure, but there are significant signs that all of this is changing. Recent developments have not gone unnoticed to many, and the seascape seems to be changing for the better.
Where Is GE Now?
Many investors love to point out the past as a reason not to invest. I believe this is completely flawed, simply because we have not developed a time machine yet, to go back in time and change what has already happened. Living in the past is a problem for human beings from a personal standpoint, as well as an investing standpoint.
We should take a look at the recent performance of GE to see where we are right now.
The chart above shows the share price from February 2009 (when they slashed dividends) right up through today (8/16/2012). Nearly a 250% increase.
This chart shows the correlation of the dividend increases (since they slashed them), to the current share price during the same period. The dividend has more than doubled in roughly 3 years.
This chart shows the rebound in revenue growth as it correlates with the share price and the dividends. Revenues have nearly doubled during the same time frame, just as the dividends have.
Even in this chart, earnings per share has come back to life by roughly 40%, as it relates to revenues, dividends, and share price.
For anyone to shrug these positives off, is simply a refusal to face the facts of what GE shareholders have, right now.
What About The Future
We cannot predict anything about the future, and for anyone to claim otherwise is ridiculous. There ARE some interesting developments however, that must be noted.
First up is the not so subtle shift in the political leanings of GE as a company, and that of Jeff Immelt, who obviously is setting the tone, one way or another.
As reported in this article, GE is one of more than a few companies who are diverging from the Obama platform;
"Employees of General Electric Co. (GE) are giving 63 percent of their contributions to Republicans this year, almost a mirror image of their distribution in 2008 when Democrats received 66 percent of their donations.
"GE employees contribute personal funds to any candidate they choose," said Lindsay Lorraine, a company spokeswoman"
I do not believe for a nano second that Immelt did not have at least SOME influence in this shift. Especially after noting some other significant moves by the company.
If you were not already aware of their recent move related to the energy sector, you should be. Just take a look at this recent article, which to me is enormously important to the future of GE and what I percieve to be the dramatic increase in shareholder value down the road.
"General Electric, the world's third largest conglomerate, surprised the financial world recently by announcing the splitting of its huge energy business into three separate entities, effective during 2012′s fourth quarter. The current organizational makeup of GE energy activities will be phased out by the end of the year."
This is huge news folks. It appears that GE (and Immelt) are reversing course in the energy sector and has realized that the immediate future still belongs to natural resources, not just the renewable sector.
"Although the controversial head of one of the world's corporate super giants is closely allied with the Obama Administration, as Chief Advisor to President Obama for "job creation," Immelt obviously has far greater appreciation than Obama for the economic dynamics that "fossil fuels" (coal, oil, natural gas) provide to a malingering economy. This is unlikely to improve before the November 6 general election."
Seems to me that GE has apparently woken up to reality, and Immelt and the Obama administration could be at loggerheads. That spells gains for GE and shareholders in my opinion!
To highlight how big a deal this shake up take a glance at this:
"The current GE infrastructure numbers over 100,000 employees and is expected to generate $50 billion in revenues, in the context of GE's total business approximating $150 billion this year. Also significant is the fact that the new stand-alone businesses, GE Power and Water, GE Oil and Gas, and GE Energy management will report directly to the business behemoth's boss, Jeff Immelt."
"GE's dramatic split-up of its massive energy business bespeaks an expectation of future growth far exceeding the already impressive levels it has reached currently. Immelt's appreciation of energy's dominant future likely influenced Obama to impose the shackles that have temporarily been forced on the Environmental Protection Agency, and its fiery boss, Lisa Jackson."
We cannot change the past. It is a cancelled check. We can only guess at the future with the moves that are made in the present, and the present is all we have.
General Electric should be in every retiree's portfolio right now. Actually it should be a core holding in ANY portfolio for the long term.
Disclosure: I am long GE.