General Electric for the Long Haul
Muhammad is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I am inclined to believe that General Electric (NYSE: GE) is one of the utility stocks that is most critical to the United States. As such this multi-billion dollar conglomerate has been on the forefront of chartering out both new and viable ways through which the provision of household utility services can be enhanced. Investors have been keenly and anxiously waiting to see how this stock will perform after a disappointing last couple of years. Changes have been made on the executive level and with that come great hope for shareholders that the company will be steered to more profitability as it is rumored that more emphasis has been placed on level of skills.
With uncertainties looming earlier on about whether General Electric will be part of the stress test carried out by the Federal Reserve, all parties had preferred to keep this matter under wraps which resulted in the stock price dropping significantly. However, a key point to note out is that as a result of these stress tests that were eventually undertaken, investor confidence has been beefed up and the results are quite encouraging. The stock price has already reached an all time high looking at the past nine months with reports indicating that there will be an expected hike in its dividend offer. For those who find themselves faced with the question of whether the risk of getting into General Electric is worth it, the answer is quite simple really. General Electric’s net income has constantly shown positive growth as can be seen from the $11 billion in 2009 increase to $14 billion in 2011. Also the cash flow per share increased from around $2 in 2009 to $2.2 in 2011. To me, these are the qualities I most desire in my investment –growth.
The recent move by General Electric to invest $300 million into a Brazilian infrastructural fund, will give it a competitive edge over other providers of utility services in the rest of the globe. Such investment moves have played a major role in the effective spreading of services offered by General Electric which has translated to an increased client base. It is estimated that General Electric spent approximately $11 billion in a period of six months which ended last year March in energy acquisitions. I believe this was a well calculated move as it would help in rallying the strength needed to counter competitors such as JPMorgan Chase (NYSE: JPM) and Wells Fargo (NYSE: WFC) who had also been making some extremely major acquisitions in the energy sector. Some critics, however, disagree about the acquisitions and their sentiments seem to have been echoed by the chairman and CEO of General Electric, Jeff Immelt. He was keen on stating that General Electric would not be looking to make a major acquisition this year as they already had a considerable number of new products that were in the production line.
So what is in store for General Electric in the future? The recovery of the United States economy is perhaps the best news for this stock. Analysts have been keen to point out the fact that a recovery of the economy will help in boosting demand for energy which will amount to huge gains for General Electric. Investors should also take note of the fact that growth of emerging markets will play a significant role in the performance of the stock for the next couple of years. I totally agree with this conclusion since the move by General Electric to focus in South East Asia and African markets will see it rewarded quite well due to the fact that both these economies are on the fast track to significant growth. Investors should also be aware of the fact that General Electric has not only made great headway on the acquisition and investment front but has also made major strides on its legal front. General Electric, earlier this month, won a $170 million verdict in a case against Mitsubishi for the infringement of patent technology.
In summary, I would highly recommend General Electric stock to any investor looking for a long term profitable investment. I predict that the value of this stock is more likely to double in the next couple of years as the policies that have been put in place are geared towards achieving just that.
muhammadbazil has no positions in the stocks mentioned above. The Motley Fool owns shares of JPMorgan Chase & Co. and Wells Fargo & Company and has the following options: short APR 2012 $21.00 puts on Wells Fargo & Company, short APR 2012 $29.00 calls on Wells Fargo & Company, short OCT 2012 $33.00 puts on Wells Fargo & Company, and short OCT 2012 $36.00 calls on Wells Fargo & Company. Motley Fool newsletter services recommend Wells Fargo & Company. 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.