GE Aerospace (GE)

Warren Buffett recently sold his holdings. The company has some outstanding assets and is a huge player in many areas, including renewables. Every time he looks at this, he concludes that this is just not a cheap stock. Even at the $25 level, it is probably selling for around 17 or 18 times earnings. They increase their dividend payout every year, which he is not crazy about. This isn’t a value stock. It is a really good company, probably at an OK price, but there are a lot of struggles.

The worst Dow performer this year, down 18%. However, you have world-class medical devices, world-class energy assets and world-class industrial assets, and if they don’t turn this around quickly, you are going to see this conglomeration broken up. The new CEO has just announced job cuts. Here’s a way to invest in a world class company. Dividend yield of 3.9%. (Analysts’ price target is $30.)

(Top Pick Apr 15/16, Down 18.44%) New management is turning them around. They are now getting a lot of revenue through their service side. But it has been a big disappointment to him.

He took it out on a stop loss. It has been disappointing. It does pay a decent dividend. Put stop losses in place and sell the business.

He likes it as a company. It is a proxy for the US economy. The company has never really recovered from 2008. The forecast for airplane sales is huge. Wind turbine projects are huge. It may be a time to look at this company.

This is at a crossroads. The CEO is on his way out. Revenues, over the last 15 years, grew a total of 7% per share, and cash flow and earnings were flat. The street is looking for close to $2 per share in 2018, and thinks that will be revised down significantly. The stock is starting to anticipate that and is falling from the high $20s into the mid $20s. He would rather buy this on the way up at $25-$27.

The stock has really underperformed its industrial peers as well as the market overall. A new CEO is coming in. The previous CEO did a lot to decrease exposure to the financial services division. The issue going forward is that they have to find something to replace those earnings. She would wait for the new CEO to come on board, to see what his vision and plans are, and what areas he wants to expand in.

The last few years has been very busy. Did a great job in selling off the GE Capital assets in order to become a pure industrial play. With the big acquisitions they’ve made, he was cautious, because any time a company is doing a huge acquisition, there are a lot of integration risks and it takes time to digest it. Now, with a Baker Hughes acquisition floating around, he would be hesitant. Wait until the dust settles.

It is down this year where as the DOW is up, so there is something wrong with it. Generally they track closely, but now they have diverged massively. Sometimes GE-N leads the DOW so could be indicating a general market correction. ZIN-T is an equal weight industrials in Canada and would be an alternative. It’s rather like a GE-N.

After the global financial crisis, they went through a process of selling off their assets. When you start divesting assets, it generates a lot of cash flow, and that attracts a lot of interest. Investors flocked to the company and did very well. For the last little while, they had some problems with 2 of the industrial businesses. One was the power business and energy is not doing very well. However, the aviation business is fairly solid and the healthcare business has also done well. If we believe that we are going to get a recovery in the energy sector, and the increasing demand for electricity and power is going to continue, those businesses will right themselves. Dividend yield of 3.7%. (Analysts’ price target is $30.)

This is the premier out–of–favour stock. It is being hurt by oil and gas exposure and they have a big power generation business. He does not see them both suffering forever. There is a change in management in November. It is a good time to be acquiring it. (Analysts’ target: $31.00).

Probably interesting, but it does have a “cash flow versus liability problem” for the time being, based on its dividend. It sold off a lot of assets so it pared its balance sheet to pay down debt. It is struggling through the problem of selling one thing, and making sure what they have allows them to grow. It has a good dividend, but presently is not earning enough to pay that. You have to question why they are paying a dividend.

(A Top Pick April 14/16. Down 12.55%.) Had been a critic of old management for quite some time, and they are finally gone. The company really needs a big shakeup. He is looking forward to the new CEO. This is a good price with a good yield.

He likes industrials, he just doesn’t like conglomerates, which are more defensive, protective type of names, which don’t have the beta. There are a number of different names he would prefer over this, such as Ingersoll-Rand, Raytheon, etc.

This has rolled over on the back of US valuations being quite stretched. It is actually a play on the global economy. Has a lot of industrial operations in different countries. The question will be how the global economy continues to stack up. If you have a positive outlook, this is a company that you can add to. The dividend is safe and will grow.