Established about three decades following the American Civil War, General Electric Co. has a long history of success and growth and is widely considered the premier industrial company in the world. The diversified industrial play had a steady 20-year run in the markets prior to peaking in late 2000 after five stock splits in that timeframe. But, since its $60 peak in late 2000, the company many considered to be the top ‘buy and hold’ stock was caught in a nasty downward trend that saw GE fall to the $20 level before trending higher.
In spite of some concerns regarding how to grow this massive $363 billion behemoth, I still consider GE a must-have stock for long-term conservative portfolios. The valuation is decent, and the diversity of the company’s holdings gives you an investment that’s similar to holding a diversified industrial mutual fund.
GE’s estimated five-year annual earnings growth is 10%. While this is not spectacular compared to some mid- and small-cap stocks, huge companies like GE constantly face growth issues. For GE, it’s about steady growth over the long term.
To grow a company with annual revenues of an estimated $166 billion in the FY06, GE needs to be on the lookout for growth opportunities, whether in a new business, technology, or fertile markets.
As far as global expansion for this multinational company is concerned, GE is quite positive on China, but, then again, who isn’t? GE reported revenues of about $5 billion in China in 2005, which is a small portion of total revenues. GE chairman Jeff Immelt says he expects its sales in China to double within the next four to five years.
The company currently employs about 13,000 workers in China, a mere 4.07% of its total global workforce of about 319,000 people.
In China, GE is looking at producing new power generation, water filtration, and other products. The company’s Shanghai research center already employs 2,000 Chinese engineers.
GE’s strategy for growth in China makes sense. As the country continues to grow, its demands for industrial applications will also grow. This is where GE will come in as it is the dominant industrial company in the world.
If you want a conservative dividend paying stock with good diversification, GE would be an excellent choice.