Motley Fool: General Electric offers diversity, optimism
If your portfolio could use a solid, dividend-paying blue-chip stock, take a look at General Electric (NYSE: GE).
The company’s recent fourth-quarter earnings report featured revenue up 4 percent and earnings per share up 11 percent. Fully 35 percent of profits were from its energy businesses, including power and water, oil and gas, and energy management. The company’s backlog of booked orders hit a record high, at $210 billion.
GE’s dividend recently yielded 3.4 percent, and the payout has been hiked five times in the past three years. GE has also been rewarding shareholders by buying back shares and reducing its share count, which boosts the value of remaining shares.
Meanwhile, the company has a variety of long-term investments that are just beginning to take root. For example, GE now controls more than 40 percent of the American wind turbine market and 35 percent of the global natural gas turbine market.
The company is reducing its focus on financial services, while expanding its work in energy, health care, aviation, mining, infrastructure and more. It’s also got a hand in some next-generation technologies, particularly the industrial Internet, which could be the connecting backbone that ties all of GE’s disparate manufacturing and services segments together. Data analytics is still a young industry, and the opportunities for optimization are immense.
Ask the Fool
Q: I saw that some insiders at a company have recently sold several million shares of its stock. When insiders sell so many shares, who are the buyers? – F.A., Decatur, Ill.
A: Shares sold by insiders such as officers, directors or owners of a company are sold in the market, where for every seller there’s usually a buyer. The catch is that if there are many more shares for sale than there are interested buyers, the price will drop – until it reaches a point at which buyers will buy.
Several million shares might seem like an awful lot to us, but remember that in the course of a typical trading day, many companies experience a high volume of trading. In recent months, Best Buy’s average daily volume was about 10 million shares. For General Electric, it was more like 43 million.
It can be smart to examine insider purchases and sales for companies that interest you. Some occasional selling is routine, as many insiders get a lot of their compensation in the form of stock and have to sell shares occasionally to generate cash. One or more insiders unloading a large portion of their shares can be a red flag, though. Insider buying is generally just a bullish sign. You can look up insider transactions at websites such as insidertrade.net.
Q: Can you recommend any books on value investing? – M.R., Rochester, N.H.
A: Try “Value Investing: From Graham to Buffett and Beyond” by Bruce Greenwald et al. (Wiley, $20), or “The Intelligent Investor” by Benjamin Graham (Collins, $23). “One Up on Wall Street” by Peter Lynch and John Rothchild (Simon & Schuster, $16), meanwhile, offers a good introduction to investing, as do many Motley Fool books.
My dumbest investment
In 2008, I’d just opened a brokerage account. Certain that the economic crisis presented all sorts of opportunities for bargain-hunting investors, I thought that Washington Mutual was “too big to fail.”
Obviously, I learned otherwise. I bought when the stock was already down, but I thought all the selling was due to unwarranted panic, and if I just held it long enough, it could make giant gains. As the price kept falling, I got gutsy and bought even more. Then one day I learned the bank had been forced to close. I thought there would be some kind of warning before this happened, so we stockholders would have time to sell. I lost every penny I’d put in it. – J.H., Canoga Park, Calif.
The Fool responds: Often, as soon as bad news is announced, a stock will immediately trade at a lower price. The trick is to stay on top of a company’s progress and to get out if you no longer have faith in it. Unfortunately, once a company files for bankruptcy protection, most stockholders will get little to nothing.