General Electric Stock At 10 Year Lows
In 1876, one of America’s greatest inventors set up a research and development laboratory. Like a mad scientist, he oversaw a team of researchers dedicated to inventing and improving a number of devices. Often these inventions were tied to mass communication and electricity. Arguably, the greatest invention to come from the establishment was the incandescent light.
I’m sure you all recognize this great inventor. . . Thomas Edison.
Many people don’t realize a few short years later he established the Edison Electric Company. The company was notably backed by the Vanderbilt family, and a great American financier, J.P. Morgan.
So why do we care about a company that was formed in 1878?
We care, because it became an industrial powerhouse, and a leader in American business. Give me just a moment to explain. Edison went on to patent a long lasting light bulb and founded the first electric utility (Edison Electric). In 1892 Edison merged his electric company with his biggest competitor to found General Electric Company.
One of America’s largest and most successful companies came from those humble beginnings.
GE’s always been a leader in its field. As a matter of fact, the company holds another great distinction. When Charles Dow established the Dow Jones Industrial Average, GE was one of the original companies. Today, it’s the only company to survive from the original list.
GE’s become a dominant competitor in many different industries. As a practical matter, the company strives to be a top two competitor in every industry they focus on.
Think of it this way. GE has grown from a company making light bulbs to a company that dominates many different industries including: Appliances, Aviation, Consumer Electronics, Electrical Distribution, Energy, Business & Consumer Finance, Healthcare, Lighting, Entertainment, Oil & Gas, Railroads, Security, and Water.
So I ask you. “Why is the stock selling like it’s on death’s door?” GE hasn’t traded this low since 1997 – more than 11 years ago.
GE’s been brutally punished over the last year or so. I know the many arguments in favor of a lower stock price. But let me ask this. Have customers abandoned GE products? Have customers stopped buying? Has the company stopped manufacturing? Are customers not paying? Is the company going bankrupt?
The answer to all these questions is simply NO.
What we are looking at right now is an industrial giant being oversold. The company’s been thrown out like the baby in the bath water. (Water that GE products probably helped clean). Concerns over the finance arm are justified. And profits will be down – that’s a given – it’s a tough economy. But many of the various businesses being run are still healthy. They’re still making money.
How confident am I of this?
I don’t need to be. I have the smartest investor in the world thinking the same thing. Warren Buffett recently invested about $3 billion right into GE. Then the company raised another $12 billion right after that. If it’s good enough for Warren long-term, it’s probably good enough for you and I.
The stock is at multi-decade lows and the company is paying a hefty dividend of more than 5%. Might the price fall further – it might. Might the dividend get cut – it might.
But I’m looking down the road.
Over the next ten years this company is going to continue to thrive and at these discounted levels now’s the perfect time to start accumulating a position. (Besides, with the dividend, we get paid to wait!)
Just this morning the company released earnings . . . and they were predictable. Down from prior quarters, with a healthy dose of caution and concern. But the company can still access credit markets. They are still working. As a result of the news, the stock is now trading up slightly.
Let me leave you with one parting thought. GE is a strong profitable company. They have paid a dividend EVERY QUARTER since 1899.
If you have a long term investment horizon, and can ride out short term volatility, GE should make a great investment. That’s why I’m calling it the Buy of the Century!
Category: Stocks
