GE Aerospace (GE)

(Market Call Minute.) A high-quality industrial and will participate if the general economy improves globally as well as in the US. They are working down their financial service exposure.

Gives you global infrastructure and industrial. Thinks probably by the end of the year they split the company into industrial and GE capital and you could see this going 20% higher. The valuation of the 2 pieces standing alone should be $30-$31. Yield of 3.29%.

Very diversified product line. Great sector. It will play along with growth in the economy. But over 50% of revenues come outside of the US, but the US is the strongest economy in the world.

GE grew because of GE capital and because of doing quite large acquisitions. Thinks they cannot trade at the multiple they did in the 2000s. People gave it a high multiple because of stability in its earnings, but now they diversified into areas that are a lot more volatile. Yet as the US and emerging markets turn around, GE should benefit from it. If they made a big acquisition you would see it grow more.

A good global play. They are leveraging their strengths in each of their markets.

This is a lagging play. Almost a proxy for the US economy, which hasn’t caught fire yet. With this company, you have finance, industrial, transportation, power, etc. If he is wrong and the market backs off a little bit, this will hold its own with its yield of 3.39%.

Likes the industrial space. Pretty decent growth. Dividend should grow 10%.

Very large, diversified/financial services company. Financial service is still 35%-40% of its business. Targeting to bring that down to 30%. This has hurt their multiple somewhat. Performance has lagged all industrials. A good play on the overall US economy. There are other names she prefers.

Expects this will do well and this is not a bad level to Buy it at. Nice dividend yield. One of the issues you have to face is that GE Capital drove its capital giving it a very high return on equity. GE Capital has been scaled back dramatically over the last 10 years. You are not going to get the multiple that it was trading at before. He is expecting the industrial sector to really pick up over the next couple of years.

(Market Call Minute.) Likes the business.

(Market Call Minute.) As it gets rid of more and more of its financials, it becomes more of an industrial company, which is good.

This is a good opportunity here. Trades at a couple of multiple points below the other industrials. Sort of still in the doghouse a little over GE Capital which really hurt the company back in 2008-2009. Spinning out some of the domestic side of GE Capital is really good. As time goes on, the market will forgive and the multiple will start to move back towards where the other industrial competitors are at. That represents somewhere in the neighbourhood of 15%-18%.

3.5% dividend. You saw a pretty big move since the financial crisis. Not a screaming buy but you could hang on for the yield and for the spin out of the leasing business. Prefers Element Financial. Thinks you will get a better valuation if you split up the company. You aren’t getting paid to own these conglomerates any more.

(Market Call Minute.) Great company if somebody has $250 billion in their pocket and wants to double it. You would buy this, rip it apart and give the pieces to the shareholders. It’s a conglomerate, which goes up when it is a conglomerate and goes up even more when it isn’t a conglomerate.

They are deemphasizing the financial side, such as selling their helicopter side. That side of the business tracks more leverage and makes the debt to Market Cap look a little bit out of whack. If you could set that aside and look at the industrial side, then the debt is not so high. As they increase the industrial and deemphasize the financial, the ratio is going to get better. He likes it and could see $29 one year out.