GE Aerospace (GE)

He likes this, but it has been disappointing in terms of its relative performance to the rest of the group. The industrial space is a prime sector that should do well in an environment where cyclicals are doing well, a pro growth environment, where there is reflation and economic growth. He continues to hold this because the dividend is quite nice at 3.2%. The dividend growth rate should be pretty decent going out a few years. Feels they are being caught in the transition back to an industrial company and is being overlooked by investors. However, valuations are not extremely cheap for a company like this, 18X earnings and growing at about 10% or so.

(Top Pick Mar 22/16, Down 2%) It has been a disappointment. He liked it because it was being transformed. They got out of financial services just as financial services were taking off. What hurt them in the last year was their commitment to energy services. He is still there though. He owns it as a cyclical industrial company.

He does not admire this company’s management, even though the CEO gets almost universal praise for being a great CEO. The numbers don’t support it. The CEO started with the company in 2001, about 15 years ago, and looking at sales revenues per share, they are up only 5%-6% in total. Earnings and cash flow are flat. They’ve had one misstep after another.

The chart shows this has done nothing, and it is not going anywhere. Trading in a well-defined range of about $28 and $33, so you can pick your spot. $29 is probably not a bad place to buy, but he wouldn’t pay more than that.

This is a stock he has stayed away from. Prior to 2007, when they owned GE Capital, everybody paid a higher multiple for it because of the earnings and the high return on equity, but a lot of that came from GE Capital. Now they’ve gotten rid of GE Capital, so why would you pay a much higher multiple for a company that has a lot more cyclicality than people think. It is fairly valued at these levels, so it is not going to go up dramatically.

He doesn’t own this because he finds there are other companies that are less cyclical. He doesn’t like cyclical companies, and the market doesn’t either generally. This has become more cyclical with the recent changes they have made. There are better stocks out there.

(A Top Pick Feb 18/16. Up 6.26%.) Industrials have been a theme for him over the course of the year. About 20% of his portfolios are industrials, which is probably the most under-owned sector of the market, but the one with the most upside as we go out over the next 5 years.

The glory days of those old growth parameters under Welsh are over. It was a different story back then. Too big a ship to move in the same way. The restructuring in the past couple of years makes sense. In the short term, there are going to be some headwinds as global capital spending slows. The strength of the US$ is a bit of a headwind.

Had owned this through both good and bad times. It is becoming more focused as a health care industrial and energy services. He still likes the long-term, but it has been disappointing. Doesn’t look like it is going anywhere in a hurry.

He is positive on the industrial space, but there are a lot better names you can own. Recommends you move from this and into the SPDR Industrial ETF (XLI-N) or something similar. This is a work in progress, but it is like moving a battleship.

He is pretty positive on the US economy and global growth, particularly to what is happening in Europe. These are good leverage points for this company. GE is essentially a proxy for global growth. He would probably look for something a little smaller such as Honeywell (HON-N), which would be a little nimbler and focused towards the technology side of the industrials. (See Top Picks.)

A behemoth type of company and is in lots of different industries. Finally sold off their financial services. This has come off because they are getting into the Cloud and software. When you try to grow a business this big, it is very tough to do. The market is a bit nervous, so it is kind of a “wait and see” stock.

(Top Pick Feb 4/16, Up 4.82%) They need to up their earnings. He thinks we are going to have this infrastructure play. He still holds it.

This started a trading range at the beginning of the year and he picked this up at about $28. It is now approaching the lower part of its range where he would Buy it again. It might stay range bound for a while. (Analysts’ price target is $33.75.)

A great business. It is essentially a pure industrial play now, which allows them to be more focused, and that is after selling $70 billion of assets by the end of 2015. The French engineering firm they acquired was the largest acquisition they had ever done, but that is starting to really gain traction.