"The big decline in stocks begs the question, is this the beginning of a bear market?" says Chuck Carlson, the editor of The DRIP Investor. His answer: "I don't think so."
For blue chip exposure, quality management, and diversification across many industries it's hard to beat General Electric (NYSE: GE). Unfortunately, despite the fundamental accolades earned by the company, its stock has been a rather lackluster performer in recent years.
Carlson explains, "Indeed, the issue has been extremely sluggish over the last six years and trades well below its 2000 high of more than $60. Decent earnings, a massive stock buyback, and the prospects for portfolio restructurings are driving these shares.
"With an above-market yield and reasonable valuation, these shares should outperform the broad market over the next 24 to 48 months. The stock represents a quality selection among Dow stocks.
"GE's diversified operations include aerospace, infrastructure services and products, entertainment, and commercial finance. This amalgam of businesses has generated good growth for the company. Per-share profits have more than doubled since 1998, and record profits are expected this year.
"The company's results in the second quarter were particularly impressive. Per-share profits from continuing operations rose 13% on a 12% increase in revenue. Solid earnings are only part of the bullish story for GE. The company recently announced that it is upping its 2007 stock-buyback program to $14 billion.
"A more focused GE would likely drive improved profit margins and even greater earnings growth. For 2007, the consensus earnings estimate is $2.21 per share, up from $1.99 in 2006. The stock currently trades at 18 times the estimate, not a bargain-basement valuation but reasonable for a quality company showing decent operating momentum.
"Stocks that awaken from long periods of slumber oftentimes generate nice returns for investors. GE could be in just the early stages of a nice run. Enhancing total-return appeal is the yield of 2.8%. The company pays a quarterly dividend of $0.28 per share. Given the company's size and seasoning, these shares should hold
up relatively well in a choppy market.
"DRIP investors (those participating in dividend reinvestment plans) should take note that GE offers a direct-purchase plan whereby any investor may buy shares directly, the first share and every share. Minimum initial investment is $250."
Each day, Steven Halpern's TheStockAdvisors.com features the latest investment ideas and market commentary from the financial newsletter community.
See all the posts in this special report:
- Volatile Markets: 11 stock plays for turbulent times
- Volatile Markets: Stick with General Electric (GE)
- Volatile Markets: Huaneng Power (HNP) is my pick for the next 50 years
- Volatile Markets: Target (TGT) is the retailer of choice
- Volatile Markets: Bank of America (BAC) offers low risk, high reward
- Volatile Markets: Starbucks (SBUX) is ready for a comeback
- Volatile Markets: Coca-Cola (KO) is the Real Thing
- Volatile Markets: Bet on Boeing (BA)
- Volatile Markets: Ride FreightCar America (RAIL)
- Volatile Markets: Anadarko Petroleum (APC) has valuable fuel reserves
- Volatile Markets: Dip makes Posco (PKX) a bigger bargain
- Volatile Markets: Steven Madden (SHOO) will wear well
- Volatile Markets: Precious metals are the safest place to be
- Volatile Market: Just ignore it; don't try to time it
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