While I'm chasing value, General Electric (NYSE: GE) is chasing revenue from water projects. It may not amount to much now, but GE is betting it will be huge some day and it has been working towards this goal for many years.
Although GE had estimated 2009 revenue of $2.5 billion from the water business, that is only a meager 1.6% of the $156 billion in worldwide sales generated by its major business divisions that the world's largest maker of jet engines and electricity-producing turbines is expected to generate this year.
General Electric has not said it in as many words, but the company looks positioned to become the Exxon Mobil (NYSE: XOM) of the water industry.
While GE has been acquiring companies related to water purification over the last ten years, it was already in the business in a big way supporting other industries.Although many would chide GE as a behemoth suffering from many of the same ills as other conglomerates operating in too many businesses, I see most of the businesses as related.
While the water purification division is distinct from the energy business and aircraft business, they are actually closely tied together. It seems clear that the turbine aircraft engines are very much related to the turbine generators used in dams and for standby power generators in hospitals and essential service facilities. GE has seen this overlap and extended its turbine technology to capture the power of the wind through its growing windmill business.
GE envisions water as one of three "mega-trends" in focus. I see General Electric as creating an end-to-end water empire, although the company would no doubt be reticent to use such a term. Consider this, GE supports supplying water, and power collection and purification on both the front end at the dam and the back end when it is collected after use and then treated. GE is a leader in water desalination too.
What part of the water cycle is not part of some GE enterprise? At first I thought, well the clouds are not stamped with the GE logo, but then I checked and found that GE initiated the idea of seeding the clouds as early as 1946.
As an investor in GE (I included it in my picks for 2009), I have been thinking about the company for a while. For the past 18 months business has been down across the board, leaving all GE divisions wanting. GE Capital has been hit the worst, burdened by many of the issues that have troubled the financial industry and the real estate industry. Some even fear it could take down the company.
Given the size of GE's water projects around the world, which all require financing and are a form of real estate, perhaps GE will find a way to transition GE Capital as a part of its water world.
The closing stock price for GE on Friday August 28, 2009 was $14.08.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own stock and actively trade options in GE.
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Reader Comments (Page 1 of 1)
8-31-2009 @ 10:01AM
Charles Boardman said...
I hope you are right about GE becoming the Exxon of water. It will be a big field of opportunity in a few years.
8-31-2009 @ 10:42AM
Dan Barnett said...
Hasn't Mr. Lindblad been speaking of the water issue for a while now?
But several analyists at Fox Business say GE is overvalued.
8-31-2009 @ 11:01AM
Sheldon L said...
Yes Dan, he has, and I agree with him. I would be very surprised if he does not add here to this dialog.
8-31-2009 @ 3:31PM
rosslumber said...
I had to buy a new toaster today. I made sure it was not a GE toaster. I will not pay for Keith Olbermans salary.
8-31-2009 @ 4:49PM
MaryLou Michelin said...
GE needs to rid itself of Immelt. He has taken the Company to the gutter. In my opinion Immelt should be sitting next to Madoff. Many retirees depended on the dividens that GE has always paid. Immelt lied in a letter, to retirees, saying he was the dividend would remain the same--------liar---it dropped to a dime a share.
8-31-2009 @ 5:10PM
OMALLEY115 said...
aS LONG AS GE CONTINUES TO OWN THE NATIONAL BAARACK CHANNEL (NBC), iWILL NOT GIVE THEM A NICKEL--IMMULT HAS DESTROYED THAT BRAND AND CONTINUES TO SELL PROPAGANDA EVERY DAY
8-31-2009 @ 6:48PM
jbluhm1951 said...
I never plan on buying GE stock. I can name several profound reasons not to own GE stock. I would say, before buying a brand, look closely at what the brand represents. Enough said.
8-31-2009 @ 8:10PM
NON SOCIALIST said...
Wouldnt buy a thing from Government Electric.
9-01-2009 @ 12:33AM
dilligaffudems said...
I see i am not the only one who feels that way against the communist run company of Government electric
9-01-2009 @ 2:32AM
charlie mcmasters said...
they sold products to make bombs that killed our troops in iraq..thanks GE. I won;t buy anythig from them
9-08-2009 @ 10:00PM
william lindblad said...
I am a bit late on this subject but I would like to address those that think a U.S. international company is communist.
To those that feel that way - please find out what Marx and Engels wrote. Second, find out who Joe McCarthy was. Third, please tell me that China is Communist.
The government of China is a single party communist system, but what is in practical use is anything but. As it is something quite novel it does not of yet have a name. In time I am sure it will evolve into a new form of government/economic system. I am sure that Adam Smith would love this one, combining a dictatorial system with capitalism?
Now, back to the blog. GE, diversified as it may be, has been in the water resource business for quite some time. They make filtration products that are sold in many stores and the reverse osmosis tech has been applied to salt water to fresh facilities over a large part of the globe. To the best of my knowledge they have never been able to achieve much better than 75% efficiency in these operations. This may sound bad, but if one expects to make improvements, you have to start somewhere. In time, I expect that they will.
If this sounds like a bad investment please consider that the fresh water supply of this planet has not increased dramatically since the time of Moses. While we have made great man made lakes like Lake Meade, we have also put many pollutants in the aquifers, and hence, our water supply. Presently, there is a major drought in Texas, a water supply problem in So. Cal and only last year the city of Atlanta, Ga., faced a potential "no water" situation. Barcelona, Spain has been bringing in water by tanker. I mean ships, not trucks. This is the world today.
If anyone thinks that water tech is foolish, please let me know when your cup of coffee is a cup of sand.
Water is also a requirement for agriculture. Go out and rent a video of the flick "Soylent Green" and find out what they were eating!