NEW YORK (TheStreet) -- If Berkshire Hathaway's (BRK.A) May 3 annual shareholder meeting means it is open season to speculate on potential changes or investment ideas at the Warren Buffett-run conglomerate, then I believe it's time to talk about General Electric (GE - Get Report).
GE may be in the process of transforming to the type of business Buffett would feel comfortable adding to his portfolio of large investments, which include IBM (IBM), Coca-Cola (KO), American Express (AXP) and Wells Fargo (WFC). At the very least, it's worth asking Buffett at Saturday's shareholder meeting whether his views on GE have changed recently.
Berkshire made a critical investment in GE's preferred shares as the industrial and financial services giant sought capital during the financial crisis of 2008. While GE has since redeemed that multi-billion dollar preferred stake, Berkshire recently disclosed a 10.6 million stake in GE common stock, a legacy of stock warrants Berkshire negotiated in the 2008 preferred deal.
Maybe, Buffett and Berkshire would now consider a new or larger round of investment.
General Electric and its CEO Jeffrey Immelt are in the process of pressing a $17 billion bid for French conglomerate Alstom's thermal, renewable and grid businesses.
Immelt's move, GE's most aggressive since the financial crisis, may be the kind of deal Buffett admires. At once, GE's play for Alstom appears slightly opportunistic, has a high strategic focus, and increases the company's exposure to industries and markets that may be in the throes of a cyclical upturn. There are two simple ways of looking at GE's deal:
Earth, Wind and Fire
Alstom's energy and grid businesses fit within the realm of GE's biggest post-crisis strategic imperatives such as a re-connection with the company's industrial roots and a long-term bet on rising energy-related economic activity in North America, South America and Western Europe.
GE continues to divest or reduce its exposure to financial services operations built up before the crisis, and which have burdened its balance sheet in the years since. Meanwhile, Immelt has redeployed GE's capital into the company's aviation, power & water, energy, health care, transportation and home services businesses.
With Alstom's assets, GE would emerge as the biggest force in many of the company's most important markets.
Combined, GE and the Alstom would hold a leading position in the manufacture of gas turbines, a number two position in stream and hydroelectric turbines, a third-leading position in boilers and power grid transmission, and a fourth-leading position in wind, according to Credit Suisse estimates. Overall, GE's power and water division would be a global leader with $43 billion in annual revenue.
GE's industrial operations would generate 55% of their revenue from energy markets, a more than doubling from a decade ago, if it succeeds in winning Alstom.
Stumbling Toward Opportunity
A more simplistic way of looking at GE's bid for Alstom assets is to consider the French conglomerate's stock chart.
Alstom's shares hit a nine-year low earlier in 2014, amid an uncertain outlook for the company's nuclear and coal operations, and a general overhang of government policy in France. Alstom's tumbling shares may have paved the way for GE's emergence as a bidder on many of the company's prized assets. Give credit to CEO Immelt for moving quickly, and at a speed that resembles Warren Buffett's tactics.
For Berkshire, both GE's apparent focus and its opportunism in bolstering its exposure to energy and water-related turbines and grid infrastructure may be compelling. Meanwhile, GE's investment in Europe by way of Alstom might be an attractive way for the conglomerate to gain exposure to markets that may return to growth in coming years.
GE is also in the process of increasing its returns of capital to shareholders.
Is Berkshire looking to take a multibillion dollar stake in GE and add a fifth large investment to its so-called "big four?" I have no idea. ExxonMobil (XOM), also appears to be a growing investment for Berkshire.
Bottom Line: At Berkshire's daylong shareholder meeting, someone should ask Buffett and his lieutenant, Charlie Munger, about whether their views of GE as an investment have changed as a result of the Alstom offer. The answer might be newsworthy.
-- Written by Antoine Gara in New York.