GE Aerospace (GE)

This has been repositioning its portfolios businesses over the last 5-6 years since the financial crisis. They were decreasing their exposure in GE Capital, retrenching in those businesses and selling off some. In October they announced a joint venture with Baker Hughes where GE is going to own 60%. They still have 8 different reporting segments, with none accounting for 20% of their earnings. Still very diversified. Trading at about 20X forward earnings, so it is not really that attractive. With divesting of assets, they have to replace the earnings those assets were generating. They’ve been putting some of that money into share buybacks, but that can only go on so long. She prefers others.

(Top Pick Feb 4/16, Up 11.43%) Once they throw off GE Capital this will be a renaissance industrial corporation. Then his model price would go substantially higher. But none of that has happened yet. It has a 3% dividend. His model price is 15% below the current price.

An industrial name that has benefited a lot since the Trump election, because it is mostly an industrial type company. He likes that it is not as financial as it used to be. They are buying some good assets. Has a decent yield.

It can do well because of Trump. He sees a reasonable amount of upside and a nice dividend.

It was a failed stock and the price reflects the stock. Revenues are up 8% over 15 years with flat profits. They made a big acquisition a couple of years ago in France, but it is not the best business environment with French labour laws. They probably over paid for the deal. Stay away from GE-N.

Not a stock he is interested in. When he screens his 7000 global stocks, he whittles the list down to about 165 companies that are generating consistent free cash flow. This gives them the financial flexibility where they can continue to grow and innovate. GE’s free cash flow has been declining at a huge rate, partly because of the spinoff of the credit business they had. As far as investors are concerned, this is very slow on the uptake. Prefers others such as Littelfuse (LFUS-Q).

With what Trump is doing, and this company’s exposure to energy infrastructure exposure to the US, you just hang onto this. Dividend yield of just under 3%.

He loves this, but are not moving fast enough for him. Looking at alternative energy, this company is perfectly positioned. He likes that they spun out GE Capital. They need to substantially increase earnings to get going.

(A Top Pick Dec 8/15. Up 6.23%.) He has a model price of $25.60, an 18% overvaluation. Anticipates that once they get rid of GE capital, etc. that model price will go up substantially.

(Market Call Minute.) A great way to participate in an improving US economy. They’ve made a big bet on energy, so this is another way you can get some leverage to the energy sector. A good solid business and they pay a nice dividend.

(Market Call Minute.) A very disappointing company. Not sure why the CEO gets the credit he does. Revenues in total over 15 years has grown only 17%. Cash flow per share in earnings per share is flat.

This is probably a better company today than it was in 1997 when they were getting into all kinds of financial engineering/financial companies, which were much riskier. A very solid company that will grow with the global economy. They are a free cash flow generator.

(There is some kind of a deal with Halliburton.) He doesn’t see how they could have done that acquisition without spinning the assets and getting access to financing as a result. Has been very concerned with their decreasing free cash conversion that they have reported over the last several years. He puts this one on the “too hard” pile.

(A Top Pick Nov 2/15. Up 9.34%.) He likes the industrial space, but he has morphed more towards midsized companies that are more domestically focused. With the strength of the US$ versus the world currencies, there has been a pickup in the mid-cap part of the market. Doesn’t think you will get hurt with this. A great company and exceedingly well managed.

Market Call Minute. She would hold this for the recovery in the US as a diversified industrial company.