bigtime99

Forget GE, These Are the Industrials Investors Should Consider Owning

Immelt has said that GE capital is going to make money in 2009. That's pretty impressive in this environment. He's downsizing it appropriately. When the tide of the crunch turns, if he is smart he will expand it once again; going forward ROE will be far higher if he continues the model.

The structure of GE capital is different than a bank - they lend out to finance contracts for their own industrial products and projects. It is sometimes difficult to secure $10 billion for a new GE nuclear reactor, for example. They weren't issuing subprime debt to people who shouldn't own homes like BAC. Debt quality counts as much as quantity, and this is why they still hold the AAA rating. What is AIG's debt rating?
Furthermore, their leverage is 8:1 not 35:1 like Citi and some of the other offenders.

The future is bright for GE once the current recession ends. They are well positioned in areas such as alternative energy, and they are going to take a big piece of China and India's future infrastructure pie down the road.

GE is being punished like the banks and I think this creates a good long term entry.