The Letter 'G' (GE), (GHM)
GE
GE got too cheap to pass up. I've been watching it since the hammering after the last earnings report and it looks like a good value.
Not a lot of detailed analysis here. For one, there are so many pieces to GE that trying to analyze it in detail would be a full time job and then some. Aircraft engines, stationary gas turbines, locomotives, electric machinery, financials, drilling equipment, NBC, water treatment, wind power, medical equipment...it would be easier to list the businesses they're NOT in. It's tough to imagine a more diversified (or maybe deworsified) business anywhere.
GE fits the profile I target for much of my portfolio. Above average dividend yield (4%), history of dividend hikes (32 consecutive years), reasonably low payout ratio (53%) and predicted earnings growth to support future payout hikes (11%).
The widely diversified business model makes it virtually impossible for the company to fire on all cylinders, but also means something will nearly always be doing well. The last earnings report was a disappointment due mostly to poor performance in the financial business. The market has it priced a lot like a financial company, but GE has a lot of business in some of the strongest parts of the economy.
The selloff in this stock sure looks like the market put a great long-term holding out on the deep discount aisle.
Graham
My biggest winner in SLO, Graham Corp. (GHM) issued a press release on Friday outlining $10 million in international refinery equipment orders. I thought the release helps explain part of the picture driving oil prices. The orders in GHM's release are for refinery projects in South Korea, China, Malaysia and Russia. This supports the argument that oil demand is growing outside the US and is keeping upward pressure on crude prices. It also adds to Graham's already solid backlog.
Graham also got a mention in Barron's Research Reports section. Singular Research put a buy recommendation on the stock. I bet Singular's customers would have been happier if the buy rating had been issued four or five months ago so they could have been in on the quick double.
Disclosure: I own some GE and GHM.
Comments: View Comments | Saturday June 7, 2008 | Stocks: GE, GHM,
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Archive Comments (6)
Russ,
GHM has had a pretty good run.
DRC ( Dresser-Rand ) started moving up about 3 months ago. They make compressors for oil & gas production and for refineries and other industrial users. Do you think that it might move up faster and / or farther than GHM considering their present " starting" points.
DRC has a much lower PE and a higher StockScouter rating and has 10 times the market cap as GHM and has an active stock buy-backprogram. GHM and DRC both have 5-Star CAPS rating.
DRC options traded in the market and GHM does not to my knowledge. I like to watch the options as a future indication of what the Smart Money's opinion are about a stock's prospects.
Thanks for not mentioning GM as a " G " word. That would have been scary.
From now on you're the G-man in the SBI ( SLO Bureau of Investigation )
Don ( fka VikingWarrior )
Posted by don ferk June 8, 2008 3:32 PM
Don,
I think your longboat is on a course for pillage and profits with DRC. From a quick scan of the vitals, it looks good. Easy on the steering board (the origin of starboard) and keep 'er so.
I tried my hand at target prices for GHM after the 30 May earnings report. The top end of the 12 month target came out to low-90's and the bottom end was in the mid-60's. I've taken some profits in SLO and real, but hung on to enough to enjoy the ride. The earnings report bumped 'fully valued' up some, but mid-70's is is in the error band. It's a great company, but stock valuation is getting up there.
The beauty of companies like GHM and DRC is their products are needed no matter what happens in the energy world. Oil, oil sands, oil shale, coal-to-liquid, bio fuels - it doesn't matter, they all need compressors, pumps, condensers, heat exchangers, ejectors .... DRC and GHM keep getting orders no matter what.
I'll do a little more research on DRC and use that for my qotw rather than whatever Jamie throws at us this week.
Russ (charter member of the SBI)
Posted by Russell Krull June 8, 2008 9:37 PM
Thanks Russ for supporting facts on GHM. I actually picked that stock on June 4 at SP, after some small researc on it.
http://www.socialpicks.com/ideas/show/176343
Posted by astuk June 9, 2008 9:55 AM
How about I make DRC the question of the week?
Jamie
Posted by rationalinvestor June 9, 2008 1:03 PM
A qotw inspired by the Viking Warrior! Should be excellent.
Posted by Russell Krull June 9, 2008 1:17 PM
I totally agree with you on GE. I've got a price trigger on it in my real portfolio. Seems like now is the time to buy, but.... That's what I thought six months ago in my SLO portfolio and it has plummeted since.
I also really like BAM which resembles GE in being hit hard by financials and real estate even though it's not really either. Have a price trigger on that too for getting more.
Posted by Eileen Teska June 9, 2008 2:32 PM