General Electric (GE)

This is a lagging play. Almost a proxy for the US economy, which hasn’t caught fire yet. With this company, you have finance, industrial, transportation, power, etc. If he is wrong and the market backs off a little bit, this will hold its own with its yield of 3.39%.

Likes the industrial space. Pretty decent growth. Dividend should grow 10%.

Very large, diversified/financial services company. Financial service is still 35%-40% of its business. Targeting to bring that down to 30%. This has hurt their multiple somewhat. Performance has lagged all industrials. A good play on the overall US economy. There are other names she prefers.

Expects this will do well and this is not a bad level to Buy it at. Nice dividend yield. One of the issues you have to face is that GE Capital drove its capital giving it a very high return on equity. GE Capital has been scaled back dramatically over the last 10 years. You are not going to get the multiple that it was trading at before. He is expecting the industrial sector to really pick up over the next couple of years.

(Market Call Minute.) Likes the business.

(Market Call Minute.) As it gets rid of more and more of its financials, it becomes more of an industrial company, which is good.

This is a good opportunity here. Trades at a couple of multiple points below the other industrials. Sort of still in the doghouse a little over GE Capital which really hurt the company back in 2008-2009. Spinning out some of the domestic side of GE Capital is really good. As time goes on, the market will forgive and the multiple will start to move back towards where the other industrial competitors are at. That represents somewhere in the neighbourhood of 15%-18%.

3.5% dividend. You saw a pretty big move since the financial crisis. Not a screaming buy but you could hang on for the yield and for the spin out of the leasing business. Prefers Element Financial. Thinks you will get a better valuation if you split up the company. You aren’t getting paid to own these conglomerates any more.

(Market Call Minute.) Great company if somebody has $250 billion in their pocket and wants to double it. You would buy this, rip it apart and give the pieces to the shareholders. It’s a conglomerate, which goes up when it is a conglomerate and goes up even more when it isn’t a conglomerate.

They are deemphasizing the financial side, such as selling their helicopter side. That side of the business tracks more leverage and makes the debt to Market Cap look a little bit out of whack. If you could set that aside and look at the industrial side, then the debt is not so high. As they increase the industrial and deemphasize the financial, the ratio is going to get better. He likes it and could see $29 one year out.

If they spin off the financial business it could be a one-time dividend for shareholders. Usually this would unlock shareholder value. Prefers ABB-N, a pure play industrial play, which he owns. A 12 month time frame for GE may be too short.

4^th quarter results were mixed and not as good as street was looking for. Long term they are going back to their industrial roots.

The market is overbought so let it be your guide. The US market has a pretty good long time future. Prefers UTX-N

(A Top Pick April 19/13. Up 21.37%.) They have a railcar business, healthcare technology business, 25% of revenues exposed to energy on the services and pipelines side. Have run off the capital side and earnings are naturally going to be lower. What people miss on this is that it also brings down risk exposure.

Their problem in the last few years was due to the GE capital business which is still 45% in earnings. They are trying to shrink that to about one third in earnings. Very strong in industrial, engines, aerospace, power. Likes it but he wants to see financial contribution come down a little bit more before he gets comfortable getting in.