GE Aerospace (GE)

It was a very good industrial based company. It was transformed to financial just in time for the financial crisis. They are in the process of disposing of their financial exposure. It is trying to transform itself back into an industrial conglomerate. He thinks this is very positive.

It is a black box and it is hard for analysts to know what is inside of it. The root cause of a lot of that was GE Capital, which they recently announced they are selling 90% of. By 2018 their earnings will be 90% industrial activities. They will get cash from selling those businesses. They are going to buy back $50 Billion in stock during that time. A third of the stock price will be returned to you by 2018. It looks very good. The dividend yield is very attractive. LII-N is his favourite company in this space. The air conditioners from 2006 now need replacement. The Furnaces have a life expectancy 5 years longer. It is a great replacement cycle.

Nice dividend at 3.4%, which should grow by about 4%-5% on a yearly basis. Trading at about 19X forward earnings, with a decent growth rate in the high single digit/low double-digit. Valuations are getting a bit stretched, but technically it is breaking out a little bit and is above the 50 day moving average.

For the 1^st time in 25 years he is positive on this company, and only because they are divesting GE Capital. It could easily double if they just got rid of GE Capital. His model price is $21.14, a -22%. Paying a 3.4% dividend.

(Market Call Minute) Prefers HON-N, as it is the company that GE-N wants to be.

This is part of the industrial sector and historically its period of seasonal strength is from around the middle of October right through until the end of April. The stock is now starting to roll over. Technically the trend is still on the upside, but the strength relative to the market is slightly negative and looks like it is moving below its 20 day moving average as well.

Covers the world. Management has refocused their efforts and got out of several lines. They really cleaned up their act. They are THE industrial play in the world. They have good technology.

He does not think it will go up a lot. They are getting out of GE capital. It is back to its roots as an industrial company. He thinks you will get increasing dividends and share buybacks. It is not a bad story, but he does not see it trading at huge multiples like it used to.

Have decided to scale down about 40%, to less than 10%, on their financial services side over the next few years. Stock popped on that news. Hadn’t own this in the past because financial services was such a large component. They are going to do a significant buyback on shares with the proceeds. She prefers some other industrial names.

He does not look at the headlines before looking at valuation. He sees a potential to earn $5-6 per share. They have rising free cash flow. He feels the headline risk is already priced in. He will continue to buy it.

Sold his holdings about a year ago. They recently made a huge announcement in terms of selling off the assets of GE Capital. This had been a problem through the 2008 time period because it was a financial hiding out as an industrial. The selloff is going to hurt earnings because GE Capital is a big contributor to earnings. They are offsetting that in large part with a huge buyback.

This company is going to do what the market does. It is a very diversified company, but it is not a defensive stock. If the economy turns down, this company will turn down as well. In 2014-2015, the stock really hasn’t gone anywhere. It has been in a trading range. This is the period when industrials tend to be weaker.

It was a play on large cap industrial and it did well. Then it did not do a lot. They are breaking up the company and selling off the real estate assets, for example. He would buy the story. There is a dividend and you will probably get special dividends. The company is excellent.

(A Top Pick May 2/14. Up 5.22%.) Moved up over $28 on the news on their financial side, which is what he thought would happen. They have basically said they are giving back $90 billion back to shareholders over the next 3 years. He is going to hold it because he thinks it is worth $32-$33.

(Top Pick Apr 16/14, Up 8.39%) They had two areas that did not perform. Merchant banking and oil. The other divisions were quite good. He has not sold any. It has plenty of upside. They look very interesting going forward. It has a reasonable yield.