General Electric Company Stock Could Get Buffett Boost

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General Electric stock - General Electric Company Stock Could Get Buffett Boost

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There has been a great deal of speculation about the possibility of Warren Buffett investing in General Electric Company (NYSE: GE). I believe that GE definitely fits the profile of a company that Buffett would want to invest in. Moreover, General Electric stock has strong fundamentals and multiple positive catalysts, whether or not Buffett buys the stock. As a result, GE stock is a buy at current levels.

Here’s why I think the Oracle of Omaha could invest in GE.

For the most part, Buffett likes to invest in companies that make staple products or provide staple services — things that people need, not things that they want or might want down the road. Just look at many of the companies that Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) owns or in which it has invested: auto insurance companies, electric utilities, real estate and The Coca-Cola Co (NYSE: KO) are among its most prominent holdings and investments. People need auto insurance, electricity and homes, and they need beverages. For the most part, Buffett doesn’t invest in companies like Fitbit Inc (NYSE: FIT), Zynga Inc (NASDAQ: ZNGA), Coach, or McDonald’s Corporation (NYSE: MCD) — companies that make things people might want but don’t need.

Most, if not all, of GE’s products fit this profile. For example, airplane-makers need airplane engines, electric utilities need gas turbines, and hospitals need MRIs. And of course, consumers need airplanes, electricity, and MRIs.

And Buffett has shown an interest in investing in companies that have strong brands and businesses but need his help and thus are willing to give him a sweetheart deal. Specifically, during the financial crisis, Buffett made those types of investments in Bank of America Corp (NYSE: BAC) and Goldman Sachs Group Inc (NYSE: GS).

GE is in a similar situation to the one those banks faced when Buffett invested in them. Specifically, GE is a leader in the main sectors in which it operates — power, energy services, aviation, and healthcare — but circumstances, particularly in the power and energy services sectors, have caused it to struggle. Yet like the banks in 2008-2009, GE is likely to bounce back as its aviation business expands further, and as its energy services and power businesses rebound, for reasons I described previously.

General Electric Stock as Sweetheart Deal

However, in order to obtain needed capital and regain credibility with the market, there is a good chance that GE could be willing to give Buffett the type of sweetheart deal he received from Bank of America and Goldman Sachs.

Furthermore, like Bank of America and Goldman, Buffett knows there is little or no chance of GE going out of business. So if he makes an investment in GE that pays him dividends, he is sure to at least cover his investment over time with the dividends, even if GE stock does not take off. Additionally, there may be synergies between GE and Berkshire’s electric utilities, i.e. GE could provide turbines and other equipment to Berkshire’s utilities at discounted prices.

Bottom Line on General Electric Stock

Then there are the more commonly cited reasons why Buffett could be interested in investing in GE. He actually did invest in GE during the financial crisis, and  Buffett has stated that he might be interested in making an investment in the conglomerate.

I, and others, may be wrong about Buffett’s willingness to invest in GE. At any rate, the company’s fundamental outlook remains strong, as its aviation and healthcare businesses are performing well, while, as I have noted in the past, its energy services unit should benefit from the Trump administration’s policies and its power business should get a major boost from the proliferation of electric cars.

I recommend that investors buy GE stock because of these fundamentals. However, the very real possibility that Warren Buffett could invest in GE stock certainly makes the shares significantly more attractive.

As of this writing, Larry Ramer owned shares of Fitbit stock. 

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.


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