No matter what it does, General Electric Company (NYSE:GE) has a reputation of being so big, it’s boring. Indeed, GE stock is difficult to classify. Is the industrial giant an energy company, an aviation manufacturer or a suddenly hot tech firm? Maybe it’s just a dividend monster. All of these attributes fit well for General Electric, which is exactly why GE stock is primed for success.
We simply have no reliable way of forecasting what’s in store for us over the next four years. Even the most partisan individual would agree that the current political environment is rife with volatility. This lends itself to a great deal of uncertainty that definitely has an impact on the markets.
Unlike GE stock, investments that are levered too tightly to a specific sector may end up blindsided.
A great example is the major financial institutions. Sector benchmarks such as the Financial Select Sector SPDR Fund (NYSEARCA:XLF) soared when then-candidate Trump became President of the U.S. Promises of fewer regulations buoyed big banks. But this year, the XLF has disappointed, holding at parity with January’s opener. While multiple reasons exist for the momentum decline, heated vitriol in Washington didn’t help matters.
That doesn’t necessarily make GE stock a sterling alternative. Year-to-date, General Electric has stumbled 4.5% in the markets. But given its vast portfolio, it’s better equipped to handle all manners of market dynamics. Furthermore, the predictable elements of President Trump’s administration align very favorably for GE stock.
The Many Faces of GE stock
Let’s consider energy. Obviously, it’s an extremely volatile sector, as events from recent years can testify. At the same time, those that have survived the energy turmoil are leaner and meaner. With the ugliness in their books being worked out, and with attractive futures contract pricing, energy companies are rebounding. In turn, “energy companies will need more equipment, products and services from GE,” according to InvestorPlace contributor Larry Ramer.
It’s not just fossil fuels, either. General Electric has a vested interest in renewable energy production. If successful, this action would further our energy independence — a big deal, indeed!
A sector of General Electric that doesn’t quite get as much attention as it deserves is aviation. The airline industry is sometimes subject to being a hit-or-miss affair. However, the number of passenger miles that are flown steadily increased since the onset of the Great Recession. Better yet, flight data indicates that President Trump is not having a negative impact on air travel. Thus, I’m looking for airliners to do well, and in turn, GE stock.
Finally, if and when Washington decides to work together on healthcare reform, then General Electric becomes considerably more compelling. They have extensive reach in terms of medical specialties, and their research and development team is involved in cutting-edge therapies. They could also potentially contribute to making treatments more affordable, a desire close to the President’s heart.
The intriguing play for GE stock is that none of these bullish factors are mutually exclusive. As the Trump administration settles into its role, more Democrats will come to the negotiating table. Already, signs are pointing in that direction, thanks to the President’s decisive action in Syria. That means some of the tougher policy issues could be worked out, a scenario that will lift all boats.
GE Is a Long-Distance Runner
Of course, I would be remiss not to mention the GE dividend. At over 3%, that’s a fairly generous yield. In addition, the GE dividend has been a consistent factor since the company exited its recession-era woes. I wouldn’t base everything on passive income as too often, there’s a reason why high yields are offered. Nevertheless, General Electric is far from what you would call a shoddy, speculative company.
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After all, what good is it to buy GE stock for passive income, only to see it collapse in the capital markets? While no one can guarantee absolute safety, I’m encouraged by the stock’s technical stability.
Much of the ugliness for GE stock occurred in the 2000s. Of the 16 times that General Electric has gone negative in its history, six of those instances were registered last decade. The only time that shares fell into red ink this decade was in 2014. Even with this loss, GE stock is averaging 15% returns — not too shabby for a boring investment!
I’ve said it before, and I’ll say it again — General Electric is not going to make you rich. What it’ll do is provide a buffer in bad times, and an opportunity to ride multiple sectors in good times. Plus, shares will likely not rock the boat too much, making the GE dividend more meaningful. Given all the changes we’ve seen in the last five months, a little constancy couldn’t hurt.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
