GE: A Sleeping Giant that's about to Wake Up
Muhammad is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Long before the dot-com bubble, General Electric (NYSE: GE) was one of the key stocks that shook the market. It was the Apple and Google of that time. The once domineering force has since shrunk, but it is still a force. It not only has strong financial muscle but continues to fortify a strong foundation in its financial and technological divisions. This heavyweight is nowhere near mediocrity and is currently nested on a market cap of $201 billion.
Competitors like Siemens (NYSE: SI) operate in GE's shadows, as a market cap of $81 billion can’t match up. Interestingly, Siemens seemingly offers a better deal; its current earnings per share figures of around $6 are a multiple of General Electric’s $1.01. Another competitor of note in this space is Citigroup (NYSE: C) -- this financial titan extends a great deal of competition to General Electric’s financial wing. As it is, the prevalent conditions in the market are not in favor of General Electric. Critics will argue that my advocacy for General Electric is mounted on flimsy ground. I appreciate their opinion. Nonetheless, I believe that General Electric exhibits the potential to swell and reclaim its once honorable position in the food chain – a giant that is about to wake up.
General Electric’s imminent plans to improve and expand its Dayton plants have recently come to light. According to Lorraine Bolsinger, the chief executive officer at General Electric aviation systems, an estimated $17 million will be pumped into the initiative. A further $50 million will be invested in a new electrical power integrated system center, R&D to be specific. The center is planned to pick up some time next year. Therefore, a whopping $65 million or more will be set aside to ramp up operations and cut back on drawbacks. In my line of thought, this move is bold and tactical. It will renew confidence levels in shareholders and it's likely to generate a reasonable amount of revenue for General Electric. Its purse will not only bulge but it will also be able to lure high-profile investors and suppress competition from aggressive players like Siemens.
The fact that General Electric is closing the curtains on China and shifting its attention to Australia also suggests that a bright future lingers in a nearby corner. This tactical move is coupled by the shuffling of General Electric’s business lines. Jeff Immelt, the CEO, argues that the shuffling will play an instrumental role in emphasizing energy. Returning to the Australia-China Affair, General Electric is expected to find better prospects in Australia. This is ideally because Australia is friendlier to investors and has a manageable number of competitors; a complete foil of China. The Asian country currently has stringent rules and is plagued with competition. In my own opinion, I believe that General Electric stands a fairer chance in Australia. Canny investors are definitely stacking up their chips as expectations are exceptionally high. The Australian continent is set to bring in higher revenue compared to an overpopulated China. In the event that this happens, the results are all too transparent – demand will increase and supply will reduce. From economics 101, such a market behavior indescribably triggers a shoot in prices.
The signatures are there; GE landed an $80 million deal with ATP. The deal will see General Electric supplying various forges of production equipment for the Cheviot oil project that is based in the oil potent North Sea. This comes as welcome news to shareholders as there are growing possibilities of increased revenues in the near future. In person, I also tend to think that the deal will greatly contribute in magnifying revenue figures at General Electric.
Although General Electric is still shadowed by a few mishaps here and there, it seems to have gotten on the right track. It is doubling its efforts and ushered in the first quarter of 2012 with renewed enthusiasm. This is clearly evident in the planned acquisitions and investments in Germany that came to light early this year.
In conclusion, I am not pushing for the idea that General Electric offers the best deal. I am simply exclaiming that it is a favorable option for an investor looking for an attractive long-run opportunity.
muhammadbazil has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.