General Electric is an old stock, but anything but old-fashioned
General Electric (NYSE: GE) got whacked by the credit crisis a few years ago, but has been getting back in shape. Tracing its roots all the way back to Thomas Edison in 1876, it’s now a conglomerate with many businesses in the aviation, health care and energy industries, among others.
In energy, for example, GE has many operations, such as grid modernization, ultra-efficient gas turbines, massive wind turbines and even nuclear power plants.
In recent years, GE has been changing, becoming more of an industrial infrastructure company as it sheds various finance and appliance businesses. In its last quarter, industrial profits rose 5 percent over year-ago levels. A 15 percent drop in oil and gas revenue due in part to the slump in oil prices was countered by a strong 8 percent gain in power and water revenue (including the sale of turbines).
GE has invested some $15 billion in cleaner technology research and development, aiming for $25 billion by 2020. Its annual free cash flow is well below decade-ago levels, but is still rather hefty, topping $15 billion.
General Electric is a solid dividend-paying stock, too, recently yielding 3.6 percent. The company’s order backlog has grown to a record $272 billion – enough to keep it busy for quite a while. Its diversified operations protect it from being too dependent on any one business.
Q: What’s the best all-around stock? – D.E., Venice, Florida
A: That’s an impossible question to answer, and you wouldn’t want to focus on just one stock, anyway, lest it surprise you and tumble. (After all, who would have thought, long ago, that General Motors, US Airways or Washington Mutual would ever enter bankruptcy?)
There are, however, many great stocks tied to great companies. Many blue-chip companies, for example, are good all-around investments, offering expected growth over time, often with rising dividend payments, too. Think, for example, of General Electric, Disney, Wells Fargo, Chevron or Visa. Sporting competitive advantages such as economies of scale and/or brand value, their businesses and stock prices will likely grow over the years to come. (The Motley Fool has recommended Chevron, Visa, Walt Disney and Wells Fargo, and owns shares of Visa, Walt Disney and Wells Fargo.)
It’s best to find a bunch of great stocks and spread your assets across them. Or just keep most or all of your money in a broad-market index fund.
My dumbest investment
My dumbest investment was lending $50 to my brother on a Friday night with the agreement that the interest payment would be a pint of beer. I expected him to pay it back, which he didn’t, and I loaned him money more than once!
There is a saying: “Fool me once, shame on you. Fool me twice, shame on me.” Well, fool me three times, and I am just a bloody fool. He was studying and I was doing well, so it seemed a good idea. Family! – G., online
The Fool responds: This might not seem like an investment story, but it holds plenty of investing lessons. For starters, it’s not necessarily a bad idea to support family members who are in school or preparing for careers. You’re investing in their future, which can pay off well for them and perhaps might serve you well, too. On the other hand, this lesson is also a good reminder that we often make the same investing mistakes over and over, without learning from them.
For example, if you keep losing money on penny stocks, perhaps read more about them and learn why they’re extremely risky and a losing proposition. If you keep selling good stocks too soon, consider developing more patience. If you keep buying bad stocks via hot tips from colleagues, stop expecting the next one to do well. Remember that simple index funds can deliver solid growth.