GE's Latest Reinvention Is a Likely Boon for Investors
The hotshot FANG stocks -- Facebook, Amazon, Netflix, and Alphabet (Google's parent company) -- may dominate tech investing headlines with their exciting innovations like self-driving cars, but long before their founders were even born, one technology company dominated market.
Founded by legendary inventor Thomas Edison in 1878, General Electric (GE) - Get Report is the only one of the first dozen stocks listed on the original Dow Jones Industrial Average still there more than a century later. Its multi-faceted business and market cap of $280 billion are testimony to its ability to evolve.
GE has spent the last year reinventing itself, moving further into the energy sector, shedding its financial services unit, and steering away from the appliance business that made it a household name. Its push into alternative energy and low share price are further reason that investors should consider this industrial giant.
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In the last quarter of 2015, GE made its biggest transaction to date with the sale of a large chunk of its commercial lending business, including a $32 billion portfolio of loans and leases, to Wells Fargo. In January, the Chinese Haier Group purchased GE's appliance division for $5.4 billion.
Results have been mixed as GE goes through this process. First-quarter 2016 results beat Wall Street estimates, but just barely. The company posted earnings of 21 cents per share, versus the expected 19 cents. And sales also came in higher than forecast, at $27.8 billion. But headwinds from a stronger dollar took a bite out of revenue.
CEO Jeff Immelt remains optimistic after GE's streamlining moves: "Today our portfolio is simpler and stronger."
GE is also strengthening its focus on an intriguing sector: renewable energy. Last year, the company purchased a $10 billion wind turbine business from French company Alstom. "We are already seeing valuable synergies from the Alstom acquisition," Immelt said on the April earnings call.
Revenue from GE's renewable energy division spiked 62%, to $1.7 billion, in the first quarter. This segment saw more growth than any other in the company's portfolio.
The company is also looking to bulk up its oil and gas division, especially with other major oilfield services companies in a cash-strapped position. GE will reportedly even bid for Baker Hughes now that that company's merger with Halliburton is off the table.
GE is a great company, backed by more than a century of producing profits. The company has a history of redefining itself.
Shares are attractively priced near $30. There is a good opportunity to get into the company for the long-term. It might not spin off the sexy, quick profits that you can find with FANG stocks, but GE is a proven winner.
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.
