For the highest average total return on equity over decades, no asset class outperforms stocks. Individual stocks, however, concentrate investment dollars, and in general carry more risk than mutual funds, which generally lower risk by owning many stocks/asset classes and/or by diversification.Q: But are there any stocks that combine the best aspects of each?
A: General Electric Company (NYSE: GE) does, to a degree. GE is kind of a mini mutual fund in one company.
Diversified industrial giant GE's operations span the gross domestic product spectrum, and the globe: industry, infrastructure, media, health, commercial finance, and consumer finance. It's hard to believe that the same company that makes jet engines also produces television programs and finances the acquisition and renovation of office buildings and apartments.
In Wall Street parlance that's called a wide operational footprint and it in part accounts for GE's below-average 5-year EPS growth rate of 6.33%. Still, GE's 5-year average dividend growth rate is an adequate 9.81%, and its yield stands at 2.91%, based on Friday's closing price of $36.27. Meanwhile, GE's stock price has not ventured far from its 3-year range of roughly $30-$38, and has underperformed the Dow Jones Industrial Average.
However, and equally significant, GE's diversification has helped it to register modest but steady gains, and the stock has avoided major sell-off periods that are part of the cycle of all but a few stocks. There's little risk that GE's stock price will crash to the single digits any time soon.
For 2007, analysts surveyed by Reuters project an 8% revenue gain, to $176.1 billion and an 11.5% EPS gain, to $2.22 for GE.
Investment Category: To be sure, GE is not Google (NASDAQ:GOOG). If you're seeking that major-winner stock, one whose stock price could double in a year on triple revenues, GE is not for you. However, if you're seeking a modest, steady gainer with diverse operations, and especially if you're capable of re-investing dividends, GE may represent a prudent addition to your portfolio.
For 2007, analysts surveyed by Reuters project an 8% revenue gain, to $176.1 billion and an 11.5% EPS gain, to $2.22 for GE.
Investment Category: To be sure, GE is not Google (NASDAQ:GOOG). If you're seeking that major-winner stock, one whose stock price could double in a year on triple revenues, GE is not for you. However, if you're seeking a modest, steady gainer with diverse operations, and especially if you're capable of re-investing dividends, GE may represent a prudent addition to your portfolio.
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Reader Comments (Page 1 of 1)
2-06-2007 @ 4:05AM
ROBERT MCKIRY said...
I fine that this is a good investment company, how may i attain stock in GE ? I had a mutual fund in 1996-1999,closed it after I was devorced.
2-08-2007 @ 5:50PM
D. P. Urbanski said...
I have held GE for many years, and have done well with the stock. For the past 8 years, GE has been a "dog". My broker wants me to sell and invest in other mutual funds that are doing much better then GE. What is your advice? I have a sentimental place in my heart for GE, but if I had invested the amount of money that I have in GE stock for the past few years, I know that I would have done much better.
2-08-2007 @ 6:23AM
A. Kosmetatos said...
Are you satisfied with the stock performance?? I am not Mr Immelt should be replaced by the board.
AK