In yesterday's lunch with General Electric Co. (NYSE: GE) CFO Keith Sherin, the discussion addressed a wide variety of issues regarding the way GE thinks about managing its portfolio of businesses. My overall conclusion is that GE has a rigorous process for deciding what to keep and what to sell but as an investor I wish it was more transparent about how it makes those decisions.

Here are some of the nuggets of insight about GE which I found particularly interesting:

• At the beginning of current CEO Jeff Immelt's reign, GE was trading at a Price/Earnings ratio of 40 -- it now trades at roughly half that level
• GE goes through an annual process of evaluating each of its businesses to assess whether to keep or sell them. In so doing, GE analyzes the profit potential of the industry, GE's competitive position, whether GE is "the best steward" to run the business in a "shareholder-friendly" way, whether the business can achieve its goals, and whether there are opportunities to invest capital at high rates of return.
• GE expects its businesses to earn returns on average total capital (ROTC) exceeding 20%

Continue reading Analyzing GE's business portfolio

Analyzing GE's business portfolio originally appeared on BloggingStocks on Wed, 25 Jul 2007 11:12:00 EST. Please see our terms for use of feeds.

I'll first state that I don't really like the idea of General Electric Co. (NYSE: GE) selling its plastics division. I haven't liked it since I first saw it mentioned. I see too much potential there for GE to take advantage. In my mind, GE Plastics can provide significant cross benefits to its other divisions with the development of new materials. I've always viewed GE Plastics as it's defacto R&D department. Developing new materials figures into the forward progress of almost everything.

Be that as it may, it would seem that the plastics division shall be sold and there is solid interest in the acquisition from abroad. Last month, a firm in Saudi Arabia was reported to be considering a $12 billion offer for GE Plastics. $12 billion is about 20% more than what analysts are saying would be a good purchase price. That's not just sliced pickles buddy.

The question I'm addressing though, is would GE Plastics be a good acquisition for Warren Buffett? I haven't talked to the man so I don't have a solid picture of his criteria. I do know that at $12 billion, the purchase would fit comfortably within his stated budget, and again I say that I see tremendous potential within the division. I recently posted about the interesting developments taking place between GE Plastics and Hyundai (OTC: HYMLF) in regard to automobile manufacturing. There has also been some buzz about GE Plastics involvement with General Motors Corp.'s (NYSE: GM) new Chevrolet Volt . Perhaps GM should purchase the division? At the very least, GE plastics is an active entity and we haven't heard the last of it by far.

Perhaps Jeffrey Immelt and Warren Buffett should have lunch and discuss the possibilities. I'll see if I can arrange that... in my dreams!

Should Warren Buffett assist a GE break up by buying GE Plastics? originally appeared on BloggingStocks on Wed, 09 May 2007 13:55:00 EST. Please see our terms for use of feeds.