General Electric - Are they still a great company?

AlfredSokol said: "GE has to be one of the major legends of American business. They are still massive. But do they have the ability to lead into this century? What do you think of GE's business prospects?"

Heather said: "I think that that will slowly start selling it off, division by division. Not every division can make it profitable, so why not spin it off?"

HappyHarry said: "By most measures, yes. They earned [url=http://finance.yahoo.com/q/is?s=GE&annual]$15,000,000,000[/url] in 2003! Imagine that."

augustus said: "I don't understand anyone who wants to invest in GE. They already are worth about $270B. To grow that base is overwhelming. On top of that I don't think Jeffrey Immelt is the guy to lead GE. I seriously considered investing in GE around 2003. After a lot of analysis, I decided to pass due to the CEO. I was and still am a huge fan of Welch. Welch was one of the reasons GE did so well in the 80's and 90's. The problem with Immelt is that he does not have the kind of unique ideas like Welch e.g. Number 1 & Number 2 in every market, boundarylessness, quality initiatives,buying businesses such as GE capital and so on. It does not have to be the same ideas but he has to have a new vision. A vision as to how GE will fit and dominate in a changing world just like GE under Welch. I don't see any of that with Immelt."

uracowman said: "funny that you mention this stock because I just wrote an article over it yesterday on a brand new stock market pick website me and my friends started.If you want you can check out the article.Hope it can provide you with a little bit of insight. marketchasers.com"

augustus said: "I read your article at Market Chasers. While I don't disagree with the financial picture from statements, there is no information as to why future prospects for GE are going to be great. Much of what GE is today, is the work of Jack Welch. My big problem with GE as I stated before is that I don't have confidence in the CEO. I am not doubting that it's a good safe dividend stock. I just don't see great returns from the business."

uracowman said: "My belief is the type of products they put out.Look at all the "green" products they offer, along with the fact that they are creating wind turbines and solar panels. IMHO, alternative energy sources are going to be the next tech type boom and GE would be the type of company to develop these types of products in the near future, just look at the amount of cash they have. [QUOTE=augustus;71062]I read your article at Market Chasers. While I don't disagree with the financial picture from statements, there is no information as to why future prospects for GE are going to be great. Much of what GE is today, is the work of Jack Welch. My big problem with GE as I stated before is that I don't have confidence in the CEO. I am not doubting that it's a good safe dividend stock. I just don't see great returns from the business.[/QUOTE]"

augustus said: "Interesting. I don't know. I am out of my area of expertise. You may be right. GE wouldn't be right for me in that case since I don't get their strategy."

Spoudazo said: "I'd just like to say, Mahmooooood. ;)"

Mr. Gekko said: "[QUOTE=AlfredSokol;323]GE has to be one of the major legends of American business. They are still massive. But do they have the ability to lead into this century? What do you think of GE's business prospects?[/QUOTE] This is an interesting question but, I think I agree with Heather on this one. On one hand they're in sectors that are doing well... such as, locomotives and green tech. They're also in sectors that currently suck... jet engines and appliances (the NBC network is dead weight, in my opinion). This is, of course, the nature of a conglomerate. When you own businesses that all respond differently to various economic conditions, you can't expect to be firing on all cylinders all the time. The idea is stability and it all comes down to how each division is managed. Currently, I believe that management is spotty in GE. The reason I say it's spotty is due to the fact that they're currently trying to sell their appliances division. If GE planned on ditching this part of their business, the smart thing would have been to put it up for sale while the housing market was hot. No one wants anything to do with housing now, including the things that go [I]into[/I] houses. Personally, I would pass on GE until they can shed most if not all of their divisions they want to get rid of. I'm sure GE will be fine, I mean it's a huge company with a recognizable name! Then again... so is GM. hmm... [IMG]http://www.clicksmilies.com/s1106/sprachlos/speechless-smiley-035.gif[/IMG]"

Mr. Gekko said: "BTW, NBC/Universal is buying The Weather Channel for $3.5 Billion. [URL="http://biz.yahoo.com/ap/080706/nbc_weather_channel.html"]http://biz.yahoo.com/ap/080706/nbc_weather_channel.html[/URL]"

newguy87 said: "I've talked about GE in many other threads and I think it's a fine company. I've gone into the areas which will be growth drivers for the future etc. Welsch was a very good CEO no doubt but he was operating in a different time where it had an inflated PE and it was the norm for the time. No company this size is gonna be a stalwart of growth and demand the same kind of PEs these days, whether it be JNJ, KO, PG etc.., the point is to have stability. And I've stated before too that people say GE's share price hasn't moved in many years, while technically true but if you had bought in the last recession in the 20s and sold again in the mid 30's to 40 you'd have made anywhere from 40-60% not including all the dividends which were growing as well. The opportunity was there for those who took it. I was buying at the time but didn't sell and have been quite content to collect the divy and hold it as part of my long term retirement portfolio. Recently in the latest dive I've been doing so again slowly at certain levels. I've gone into the GE/GM comparisons, their financial exposures, Welch's leadership etc.. in other threads and I'm pretty confident in having it for the long haul."

Mr. Gekko said: "[QUOTE=newguy87;71089] And I've stated before too that people say GE's share price hasn't moved in many years, while technically true but if you had bought in the last recession in the 20s and sold again in the mid 30's to 40 you'd have made anywhere from 40-60% not including all the dividends which were growing as well. The opportunity was there for those who took it. [/QUOTE] While true, GE was quite a different company 90 years ago. What makes you think a similar move is possible?"

newguy87 said: "I've mentioned in the past that GE has positioned itself well for the future. I don't wanna retype everything all the time but I'll go into a few things. GE has gone into renewable green technologies like wind turbines, solar etc.., they've also gone into water purification which I think will be big in the future as well, their infrastructure unit has been doing very well (although I do see a possibility for a global slowdown near term) and their healthcare unit has also been doing well but this last quarter wasn't too spectacular. These things I think will be future growth drivers for the company. I think in the 80s-90s GE had a PE anywhere from 30-50, no company of this size will ever have a PE like that again, it's apples and oranges comparison I don't have to reach back 90 years to say it's not the same company and the street views it differently. You could say that about any of these huge conglomerates. Immelt has done a good but not great job redefining the company, it's like moving a supertanker it doesn't change direction on a dime. He sold the plastics biz to the Saudis for 10 billion, and as far as I know I think oil is a big input for plastic so that was a good move considering where oil has gone since the sale. The appliance unit is synonomous with GE which is my assumption for the reluctance of getting rid of it, but the street thinks it should be sold because the margins on the biz are low. So we'll see what happens there, I'm sure it'll fetch a good price even in a down housing market. The reason, the Koreans and especially the Chinese would love to have a brand like GE, I believe they would get to use the trademark for at least a year or so after a sale and also have at whatever newer technology they have (again especially the Chinese). Samsung and Haier (chinese appliance maker) would love to get their hands on that unit I think. GE's brand equity is worth a lot even in down markets. I'm not thrilled with the NBC unit myself but it adds to the diversity of the company. The financial unit has done well in the past but right now has been the main cause of the problems and as time goes by and that get resolved, things will turn around again. To be honest, since the last recession I could not see any real good catalysts for the move GE had, yet it slowly moved up (not as fast as the street may have liked) and continuously increased the divy. I see more catalysts for the next move whenever it happens than I did for the last move it had. Even though I like Immelt, he's probably somewhat on a short leash and if he gets replaced that could cause a pop too, so who knows. My point is I believe inherently GE is a strong company positioned well for the future so the stock will take care of itself over time. I don't mean just share price either, I mean through dividend growth, reinvested dividends etc.."

Mr. Gekko said: "Well, newguy87... you state some good points. The stock still isn't for me until the company meets the parameters I stated previously. That said, I wish you luck and who knows... you may be right. [IMG]http://www.clicksmilies.com/s1106/cool/cool-smiley-001.gif[/IMG]"

augustus said: "The problem with investing in GE is the opportunity cost. To invest in GE I have to give up many other opportunities which look better to me. There are so many unknowns with the company. I feel like this recent profit drop should never have happened to begin with. I am not sure what Immelt has been doing since 2001. he seems to be playing it safe unlike Welch. Also they have a huge base $270B. Its tough to grow that base anyway. There are companies with much smaller market capitalization's that can grow quicker. On the other hand if I were living simply off the dividends and wanted a safe investment I would pick GE."

newguy87 said: "[QUOTE=augustus;71105] Also they have a huge base $270B. Its tough to grow that base anyway. There are companies with much smaller market capitalization's that can grow quicker. On the other hand if I were living simply off the dividends and wanted a safe investment I would pick GE.[/QUOTE] I agree completely with this. You can't expect these huge companies to be huge growth engines anymore. Microsoft now isn't the Microsoft of the 80-90s etc.. Like any investment it always depends on what your goal is and what your expectations are. I've always recommended this as part of a long term retirement portfolio, you're not looking at the next Google here. I agree there can be an opportunity cost but that again depends on your goal and what you are seeking. Btw just saw a story in the NY Post (not the most reliable source but nonetheless) where it states that Immelt has 6 mos to turn things around, like I said he's on a short leash. I think Welch and Immelt are operating in 2 different times in 2 different environments so I think the comparison is unfair but you know the street is finicky, impatient and sometimes irrational so what can you do."

Roger said: "General electric has managed to keep profitable with its huge amount of industries. The last decades we are in a process of globalization, and firms specialize more and more. In the past we saw that conglomerates performed worse than specialised firms. This is due to the concept of budget constraint. In a conglomerate the firm can finance a bad performing industry by a profitable industry. The budget is not constrained, and this means that the bad performing industry is not punished for bad performances. In the longer term this industry will become less competitive. In the specialised firm, the firm will have more incentive to make the company competitive. General electric is one of the few succesful conglomerates over a longer term. This can be assigned to good management. I wonder wether general electric can keep this in the future. I personally dont think general electric can hold this, and selling holdings will become inevitable."

Mr. Gekko said: "[QUOTE=augustus;71105]The problem with investing in GE is the opportunity cost. To invest in GE I have to give up many other opportunities which look better to me. There are so many unknowns with the company. I feel like this recent profit drop should never have happened to begin with. I am not sure what Immelt has been doing since 2001. he seems to be playing it safe unlike Welch. Also they have a huge base $270B. Its tough to grow that base anyway. There are companies with much smaller market capitalization's that can grow quicker. On the other hand if I were living simply off the dividends and wanted a safe investment I would pick GE.[/QUOTE] That's one of my issues with GE, as well. And if you want a dependable stock with a great dividend, check out Con Edison (ED). [URL="http://finance.yahoo.com/q?s=ed"]http://finance.yahoo.com/q?s=ed[/URL]"

newguy87 said: "Funny enough I own Con Ed in my long term portfolio as well and have also been adding slowly as it has dropped into the 30s. I like diversification because of the stability and safety it provides. I thought it could go as low as 37 but I'm starting to think it even has an outside possiblity of the lower 30s. Back to the original point, it's 2 trains of thought but I side more towards diversity in general when it comes to huge companies for the stability it provides. I think their NBC unit is a little too much outside it's main focus but I'll live with it. I understand the company doesn't have focus etc, stretched too thin, too much to handle and all the other arguments which have some validity. But I'll give you some examples of why I like it in a couple sectors. In pharma I recently responded to a thread in which I liked JNJ and NVS in the pharma industry because of their diversity across various product lines like drugs, consumer products, generics, diagnostics etc... and they have been doing the best amongst the bunch and have stability Now you have companies like BMY or PFE (which I own) that have consistently shedding such assets and just focused more on drugs and they've gotten hammered because their pipelines haven't been robust as of late. If they still had some of the divisions that they sold off I think they would have been better served and not been pummeled so badly. In the financial sector you have JPMorgan which is diversified and thanks to it's access to it's huge deposit base and good management while badly hurt has been able to weather the storm as compared to say a Lehman or Merrill which are solely investment banks and have been battered much worse. Now their biz models are broken and they don't have a retail side that may provide some earnings stability. Or you could say Wachovia which is also been battered on the retail side, doesn't have an investment banking side which might help earnings a little. Even Citigroup as badly as that company was mismanaged is still able to survive battered and bruised because of it's diversification and global reach. Mind you I wouldn't touch any of the financials yet but this is just an example. If you're streamlined focus to something I think you become too levered to whatever that thing is. If it happens to be successful you're golden if not you're screwed. Even if you have good management and that industry becomes vulnerable you can still be screwed, but if you're diversified you're gonna be stable. That's what I'm looking for in my long term investments. The other point of view I think is quite valid but has a different type of investment goal and risk tolerance in mind."