Possible Bright Future for General Electric
Muhammad is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
General Electric (NYSE: GE) is one of the biggest names in the financial and technological frontier. Mounted on a market cap of $200 billion, it comfortably stamps out competition from smaller competitors like Siemens (NYSE: SI) which extends a paltry $76 billion. All the same, it is not all roses for General Electric. It has experienced a huge plunge in the preceding decade. Its current position does not promise much for shareholders. Nonetheless, it exhibits a potent potential to deliver in the long haul. As an investor, I strongly advocate for this fallen giant. This is not merely because of its past domineering position but chiefly because of its unmatched ability to deliver in the long run.
One core reason why I am surefooted in General Electric’s future is the manner in which it conducts its operations. It segregates itself from mediocrity and places its accents on its core objectives rather than the typical market dynamics. In a more digestible form, General Electric is more concerned with its primary goals than it is in market politics, so to speak. The behemoth has pioneered a landmark revolutionary in the energy frontier. The new 100W LED bulb has really rocked the headlines. This incredible work of innovation and technology not only delivers the same output as the conventional incandescent bulb but also manages to consume lesser energy. In my opinion, this breakthrough will give General Electric an indescribable edge in its space. In the event that such a foresight materializes, General Electric will be able to record higher sales and presumably higher profits.
The recent breakthrough by General Electric that allows it to detect faulty turbines beforehand also works in its best interests. This not only allows General Electric to tighten up on the occurrences of breakdowns but also allows it to allocate funds for repair beforehand. This is chiefly because conclusive speculations can be made on the expected behavior of turbines. In addition to that, technological breakthroughs facilitate the remote monitoring of turbines. Sensors in the turbines actually conduct routine checkups in timeslots of 10 minutes. Data is then sent to central databases and analyzed on a real time basis. Analysts then use proprietary algorithm to draw conclusions on possible anomalies. This system will save General Electric millions in terms of time and input. General Electric actually projects that its new system has saved an estimated $30 million and counting in maintenance and repairs. However, its core advantage is that it will streamline activities and boost efficiency. In the long run, existing and prospective shareholders will exhibit stronger confidence in the General Electric stock. This will cause a surge in demand which will inevitably spark off an increase in share price.
JPMorgan (NYSE: JPM), a firm competitor, is currently wedged between a rock and a very hard place. It has to give disgruntled shareholders a convincing explanation to the $2 billion loss that took place in just less than two months. The announcement went viral several days ago and the whole market in a way has been shocked. Before it steps out of this hole, General Electric will have gained a lot of ground.
Goldman Sachs (NYSE: GS), on the other hand, is syndicating a loan from Chesapeake Energy. The unsecured loan has attracted a lot of demand from investors and there is a possibility that this may negatively affect General Electric stock. Although, it is too early to make conclusions, it is evident that the $4 billion loan will stir a lot of movements in the finance frontier.
All said it would be out of order to overlook competition from Siemens. This smaller competitor extends formidable competition in the health frontier. It manages to pull this presumably uphill task through its highly celebrated health information systems that are currently mounted on a sophisticated cloud foundation. The health information systems record a staggering number of users as they act as the main databases for most hospitals. General Electric, therefore, needs to come up with a means of suppressing competition in the health niche.
Interestingly, Siemens geographical setting acts against it. The fact that it hails from Germany has slowed its prosperity. The supposed high exposure in the area is a factor to constantly watch. Similarly, the dim fate of the EU also places a lot of question marks.
In as much as General Electric seems to have got its act together, there are a few factors that weigh it down. For instance, the class action lawsuit filed by disgruntled investors. The investors argue that General Electric knowingly mislead them into ‘risky’ investments. The 2008 $12.2 billion stock offering allegedly led a host of investors into losses. The aggrieved investors go on to say that General Electric was conscience about its shriveling financial arm and that it was wrong and unethical to create an illusion that it was doing better than its rivals. A Federal Judge dismissed claims that other financial big wigs like Goldman Sachs (NYSE: GS) and JPMorgan (NYSE: JPM) had pushed investors into investing in the 2008 $12.2 billion General Electric offering. The judge however maintains a firm leash on General Electric and it is evident that it is still not out of the woods. In my opinion, I believe that General Electric has done everything in its capacity to cushion the would-be effects of the case. In the event that it loses, its recent achievements will cushion the after effects and all the same, there is a great possibility of winning.
muhammadbazil has no positions in the stocks mentioned above. The Motley Fool owns shares of JPMorgan Chase & Co. Motley Fool newsletter services recommend Goldman Sachs Group. 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.