With President Joe Biden’s administration’s massive spending plan likely to greatly boost investments in electricity generation, electric vehicles, wind power, and healthcare, General Electric (NYSE:GE) and GE stock should get huge boosts from the initiative.
Meanwhile, global air travel is poised to bounce back tremendously in the medium term, giving GE’s Aviation unit a huge positive catalyst.
Additionally, CBNC says the plan “proposes $100 billion in funding to update the country’s electric grid and make it more resilient to climate disasters.”
Increased Spending Will Lift GE Units
GE’s Power unit provides an array of “maintenance services,” including “generator service solutions,” reliability upgrades, efficiency increases, and technologies that can lower the emissions of gas-powered plants by 40%. As a result, the unit looks poised to greatly benefit from the proposed increases in spending on electricity generation.
Meanwhile, the conglomerate’s Grid Solutions business, part of its Renewables unit, “provides power utilities and industries worldwide with equipment, systems and services to bring power reliably and efficiently from the point of generation to end power consumers.” So it’s also well-positioned to benefit from increased spending on electricity generation.
And since Grid connects renewable energy sources with power plants, it should also get a big lift from the likely upcoming increases in spending on renewable energy.
In past columns on GE stock, I’ve established that the proliferation of electric vehicles (EV) is likely to result in increased electricity demand, causing spending on power generation to surge. Further, according to Quartz, “Nikit Abhyankar, a senior scientist at the Goldman School of Public Policy at the University of California, Berkeley” reported that “By 2050, the US will demand nearly 90% more power than it did in 2018, in a scenario in which all new passenger vehicles sold by 2030 are electric and buildings and factories also aggressively electrify.” So the trend towards EVs in particular and electrification in general should also improve the financial results of GE’s Power and Grid units.
And with the plan seeking to have 500,000 EV chargers built in the U.S., I wouldn’t be surprised to see GE re-enter the EV charger business.
Wind Power and Healthcare
GE is becoming a major force in the wind-power business. Its Haliade-X is one of the top offshore wind turbines in the world, and GE is looking to boost its “offshore wind power sales from $200 million in 2020 to $3 billion by 2024,” according to Seeking Alpha author Chuck Walston.
Happily for GE and the owners of GE stock, the administration has unveiled an initiative to boost the utilization of offshore wind power, in addition to “a mandate that would require a portion of U.S. electricity come from zero-carbon sources like wind and solar power,” CNBC reported.
A portion of the “more than $200 billion” that President Joe Biden proposes to devote to R&D, some of which is expected to be spent on biotech, will undoubtedly find its way to GE’s sizeable Healthcare unit.
Don’t Forget GE Stock Can Fly
Herd immunity is coming to the U.S. soon, and, certainly by the last quarter of this year, Johnson & Johnson (NYSE:JNJ), Moderna (NASDAQ:MRNA), Pfizer (NYSE:PFE) and others will sell their vaccines to most countries in the world. As a result, demand for airplane tickets will surge.
I also think that business travel will bounce back more than many expect in the second half of 2021, largely because I’ve heard several business leaders say recently that videoconferencing can’t truly substitute for in-person meetings.
Given all of these points, along with pent-up demand from leisure travelers, I expect GE’s Aviation unit to make as huge comeback by Q3 or Q4.
The Street appears to be greatly underappreciating the huge exposure of GE stock to the administration’s plan. Consequently, I recommend that all investors buy its shares at this point.
On the date of publication, Larry Ramer held a long position in GE.
