Political and social change in the Middle East has rattled the oil market -- with crude nearing $100 per barrel, but when conditions on the ground stabilize, the global economic growth story will likely be intact, and that's a good reason to own diversified industrial giant General Electric Company (GE), first discussed on March 2, 2009, at a price of $13.80.
GE's stock has vectored above $20 this winter, pushing $22 before pulling back slightly, but I obviously still like the shares. Here's why:
GE's energy infrastructure, consumer/industrial, technology units will all likely post revenue increases in 2011, boosted by both emerging market and developed-world demand and order increases. GE should record impressive gains in oil and gas products, health care imaging, and airplane engines. Meanwhile, losses at GE Capital Finance should decline in 2011, and there is a chance that capital finance's new business wins will exceed losses/divestitures.
Overall 2011 revenue will likely rise 2% to 3%, followed by a 2% to 4% rise in 2012.
The Thomson Reuters First Call FY2011/FY2012 EPS estimates for GE are $1.32 to $1.62. Each EPS estimate looks about 5% low, according to my analysis
Technically, as mentioned, General Electric's stock broke out of five-month $13 to $17 trading range this winter, vectoring above $20, and there's scope to $25 and beyond.
GE is one of those stocks that you can buy for your child's college fund, and in 10 or 15 years, you'll be glad you did.
2011 Outlook: I view General Electric as a long-term play, but if investors are looking to sell GE within the year, it's probably best to take your profits after it rises to $24 or $25, if it fails to clear $26.
I'd also raise the sell/stop loss to $13 from $9.25 at this stage.
Stock Analysis: I consider General Electric to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, and I liked them enough to buy, I'd consider buying a 50% position in GE now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 75% of my GE position before April 2011 and I'd put a sell/stop loss at $13.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.