General Electric - Own It Now Or Own It Later, But Own It

Oct.18.12 | About: General Electric (GE)

There are few certainties in life that we know of. The usual "death and taxes" comment is what always pops into our heads. There are fewer certainties in the world of investments. No, let me amend that -- there are no certainties whatsoever in the world of investments.

One major reason I like General Electric (NYSE:GE) is because the company will almost always touch someone's life in some form. The reason a company is "labeled" a conglomerate is because there is virtually no business sector that it does business in exclusively.

GE has it's hands basically in every business sector, in every part of the globe, touching virtually everyone on the planet. I want a company in my portfolio that has the ability to generate revenues from just about anything.

  • Home appliances
  • Healthcare
  • Aviation
  • Lighting
  • Consumer electronics
  • Oil and gas
  • Renewable energy
  • Software and services
  • Consumer and business finance
  • Rail technology and innovation
  • Medical imaging equipment
  • Water treatment products and technology

General Electric is the one stock that I can point to that has all of those ingredients. Plus, it has an incomparable brand. For my portfolio it is, and will always be, a must-own.

General Electric Is a Bargain

I think that this is a pretty bold statement, but when we clear away the cobwebs of the unfortunate dislike of the CEO and the failure to live up to its past performance, General Electric stock is cheap. It is cheap not just because of the size of it's global footprint and impact, but also because the price of the stock is so ridiculously reasonable for the type of company it is.

Breaking down the basics will help crystallize this opinion:

General Electric: Price -- $22.91/share; Dividend Yield -- 3.0%; ESS Rating -- Bullish

  • A $240 billion market cap makes it the number one conglomerate on Earth.
  • The current price is selling at two times book value, which is 10% below the industry average, with far less stellar records of other companies.
  • Last quarter's earnings growth was twice as much as the industry average, even though revenues dipped by 1.29%.
  • 2013 estimated growth is about 12% vs. 2012, which also exceeds the industry average.
  • GE's gross margin is a tick less than 56%, while the industry average is only at 49%.
  • The dividend of 3.0% is supported by a small payout ratio of 53%. The recent trend of dividend increases should most definitely continue, even after the company did what it had to do several years back by cutting the dividend when all hell broke loose.
  • 50% of all outstanding shares are held by institutions and mutual funds. I believe that 2013 will see a sharp spike in that percentage based on a global economic recovery, and a better balance sheet for GE.

Earnings are due to be announced Oct. 19 before the market open, and the consensus is earnings of $0.36/share. That is $0.02 below what GE earned last quarter. Since the overall Starmine (ESS) rating is "bullish," most of the analysts believe we will have another beat of the estimates.

There are four strong buy recommendations, two outperform ratings, three neutral, and one underperform and sell rating. The overall score on a scale of one through 10 used by Starmine is about 8.0 for GE, right now, just before earnings are released. The share price is indicative of the flow of money from individual investors coming back into the shares of GE.


This one-year chart from Fidelity Investments shows the precipitous rise from under $15.00/share to the current price. There is no doubt that the fluctuations of the share price will do what stocks always do: go up, down, and sideways. The trend here has been up, and I believe we are just getting started.

This chart clearly shows the trend is headed up, and while nothing is ever perfect or risk-free, I think buying General Electric now is a very good idea.

There are oodles of reasons why GE is my 2013 Stock Pick Of The Year. Take some time to read the article, but first, think about buying the stock today.

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.