Back in mid-May, when I first started writing my column, I told readers to draft
to their roster.
I said I thought the company had found a bottom and that it was trading at a very attractive price. At the time of my column, the stock was trading near its 52-week low of $31.55. To be exact, it had closed at $32.33 the day before.
At the time, the stage was set to grab a great company at a bargain price. The company had missed its quarterly numbers just a month earlier, and investors reacted angrily and impulsively. GE never misses its numbers, so the news came as a shock to Wall Street.
Again, that was almost four months ago. A lot can happen in four months. That's approximately the length of a 16-game football season. The market got ripped to shreds starting in late June and the circumstances could be very different.
However, one thing that has not changed is that GE is a solid, dependable play -- Jim Cramer likes this stock, and so do I. Jim has obviously much more stock market experience than I do, so knowing that he and I are on the same page with this one gives me added confidence I am making the right move when I say now is the time to add to your GE position.
Here's what you need to know about GE. It's in the technology, media and financial services businesses. It operates in four segments: GE Capital, Energy Infrastructure, Technology Infrastructure, and NBC Universal.
As for its metrics, there is a lot of positive things to point to. It has a forward price to earnings ratio of 12.07, which indicates to me that this stock is undervalued. Its beta is just 0.68, which means it isn't a particularly volatile stock. The company has revenue of more than $18 billion, with almost $19 billion in the bank. It has a whopping $45.7 billion in operating cash flow.
Having cash is a tremendous advantage because it allows companies added flexibility when trying to grow the bottom line during tough market environments.
The other data points that I'm looking at are its return on equity (ROE), which is at 18.42%, and its PEG ratio, which stands at 1.18. Then, of course, there is the stock price.
Four months ago I thought GE was attractive at $32. Now it's trading at just about $28 in midday trading. It established a new 52-week low of $25.60 in mid-July and is now a steal at this price. After all, it has lost more than a quarter of its value in the last year.
Add to this position and you will be building the foundation for a nice payout down the road, inch by inch, yard by yard.
Keep moving the chains!
At the time of publication, Brown had no positions in stocks mentioned, although positions may change at any time.
Tim Brown played 16 seasons in the NFL, where he made nine Pro Bowls. After a brief stint with the Tampa Bay Buccaneers in 2004, Brown retired as an Oakland Raider. He was a Heisman Trophy winner in college for Notre Dame.