A Strong Case For GE
July 15, 2009 14:33
General Electric is going to report earnings on July 17. having seen Goldman Sachs (GS) and Intel (INTC) take off on better than expected results, is it time to buy GE? Marketocracy's mFOLIO Master, Eugene Groysman, makes a strong case for buying GE.
General Electric (GE)By Eugene Groysman
One of the more underappreciated stocks in the market today is General Electric. I have heard a multitude of reasons as to why investors don't like GE today. From, "It's just not a good idea" to, "GE is going bankrupt". In my opinion, GE is a solid long-term play for a few reasons.
In the past 6 months, GE has been getting contact after contract. On April 6, GE Energy lands $200 million UAE contract with Emirates Aluminum. Then on May 13, GE said it will build a $100 million plant near Albany, NY., that will employ 350 people to make batteries for hybrid locomotives and other applications. Just recently, GE signed a $500 million contract with Kazakhstan's state-owned railway and will invest in a locomotive-assembly plant in the Asian country. Additionally, the Joint Strike Fighter being developed by GE Aviation and Rolls Royce just had its funding restored by the House of Representatives. These are all lucrative deals, which should keep GE profitable in the years to come.
Taking a look at the technical side of the stock. Back on July 3, 2000 the stock closed at $57.81, and since had been on a downward track due to the Internet bubble bursting and pushing the broad market down. The stock bottomed out at $24.35 in October 2002. After the market began recovering, so did GE. The stock pushed through $30 and then $40, finally topping out at $41.40 in July 2007. Then this latest market down turn hit and GE's price along with pretty much every other large cap fell, and fell hard. Finally bottoming out at $6.66 in March of this year. However, the stock has recovered, and anyone who happened to buy near the bottom has seen a nice return on his or her investment. The stock is way off its high from 2000, but even looking back one year, the stock was at $30.39, and compared to what its price is today, about $11.75, there is still a large upside to be made. Even if GE only splits the difference about $10, you are looking at a possible 100% return, and that by any measure would be solid.
It is true GE has cut its dividend to about $.40 per share, and yes it is off it high of about $1.40 per share, but one must understand the market economy. GE cut its dividend to preserve some capital, and I believe that once this recession starts coming to an end it will resume the higher dividends. The yield may be at 3.4%, but why not get a company that pays you back, so even if the stock does nothing all year, you are getting some sort of return. Also, if the stock loses, the dividend provides some downside protection.
The old investing ideas are long gone, and one needs to look for something that will around for a long time. GE would be a good long-term play for people needing to generate income, because why take capital gains, and who knows what will happen with those tax rates, and use the dividends instead. The yield may be lower, but in this economy and market, if you can find a stock that has good possibility of growth, off its 52 week high, not to mention 9 year high, and has a solid dividend, with the possibility of the dividend going even higher.
General Electric (GE)By Eugene Groysman
One of the more underappreciated stocks in the market today is General Electric. I have heard a multitude of reasons as to why investors don't like GE today. From, "It's just not a good idea" to, "GE is going bankrupt". In my opinion, GE is a solid long-term play for a few reasons.
In the past 6 months, GE has been getting contact after contract. On April 6, GE Energy lands $200 million UAE contract with Emirates Aluminum. Then on May 13, GE said it will build a $100 million plant near Albany, NY., that will employ 350 people to make batteries for hybrid locomotives and other applications. Just recently, GE signed a $500 million contract with Kazakhstan's state-owned railway and will invest in a locomotive-assembly plant in the Asian country. Additionally, the Joint Strike Fighter being developed by GE Aviation and Rolls Royce just had its funding restored by the House of Representatives. These are all lucrative deals, which should keep GE profitable in the years to come.
Taking a look at the technical side of the stock. Back on July 3, 2000 the stock closed at $57.81, and since had been on a downward track due to the Internet bubble bursting and pushing the broad market down. The stock bottomed out at $24.35 in October 2002. After the market began recovering, so did GE. The stock pushed through $30 and then $40, finally topping out at $41.40 in July 2007. Then this latest market down turn hit and GE's price along with pretty much every other large cap fell, and fell hard. Finally bottoming out at $6.66 in March of this year. However, the stock has recovered, and anyone who happened to buy near the bottom has seen a nice return on his or her investment. The stock is way off its high from 2000, but even looking back one year, the stock was at $30.39, and compared to what its price is today, about $11.75, there is still a large upside to be made. Even if GE only splits the difference about $10, you are looking at a possible 100% return, and that by any measure would be solid.
It is true GE has cut its dividend to about $.40 per share, and yes it is off it high of about $1.40 per share, but one must understand the market economy. GE cut its dividend to preserve some capital, and I believe that once this recession starts coming to an end it will resume the higher dividends. The yield may be at 3.4%, but why not get a company that pays you back, so even if the stock does nothing all year, you are getting some sort of return. Also, if the stock loses, the dividend provides some downside protection.
The old investing ideas are long gone, and one needs to look for something that will around for a long time. GE would be a good long-term play for people needing to generate income, because why take capital gains, and who knows what will happen with those tax rates, and use the dividends instead. The yield may be lower, but in this economy and market, if you can find a stock that has good possibility of growth, off its 52 week high, not to mention 9 year high, and has a solid dividend, with the possibility of the dividend going even higher.