jimmy smith

What Does Warren Buffett See in General Electric?

GE is really three businesses: a bank, an industrial, and NBC. To analyze the company you MUST examine each independently.

When you do this you see that GE's bank is extraordinarily conservative relative to other banks (1/7 leverage vs. 1/11 and higher for well capitalized banks).

You see that the industrial business is the best in the world, exhibiting the highest returns on assets and growth out there, with a excellent portfolio of businesses including everything from train engines, to water infrastructure which are going to be huge for the next several decades.

Then you've got NBC, while I think it has become an embarrassment to GE's name and should be spun off, it nevertheless is generates enormous amounts of free cash flow.

At $20 a share and a dividend yield of 6.2%, its a massive buy if you have a year or so time horizon.

GE: More Bad News to Come?

don't forget international sales. the Arabs and Chinese will be buying planes, trains, energy and infrastructure for the next 20 years - GE will be a major provider.

also, note that any real estate write downs are paper losses only. when the market improves (which it will eventually!) they will have to be written back up.

we should thus focus on operating results. all the other stuff is accounting b.s. in fact, new accounting rules are part of the problem we are now facing across the board!