The last five years have been punishing for stock market
pessimists. They were wrong about a coming depression; they were
wrong about the recovery; and they have been wrong predicting a
Selling stocks at any time in the last five years has been a costly
mistake. Central banks are determined to keep interest rates low
and liquidity ample until a more robust economic recovery develops.
And while stocks are up, valuations are still within reasonable
historical limits and far from past market extremes.
What is more likely is a stock-by-stock correction process.
Individual stocks that rise more than the broad market can become
vulnerable and pull back 10%-12%. That would be a healthy
development and not be a threat to the broad market.
For now, do not fall prey to pessimistic stock market predictions.
Instead be satisfied with modest returns for the next several
quarters, perhaps for all of next year.
Meanwhile, we continue to feel bullish about
). The company reported a solid third quarter and the stock rose to
a new 52-week high. GE is downsizing the finance business.
That will be a drag on earnings until the plan is completed. The
other part of the plan is to grow the industrial business, and that
is working well.
In the third quarter, revenues from the industrial business were 2%
better than a year ago. Better yet, orders grew 19%, indicating
stronger future growth in industrial revenues.
Excluding special charges, GE earned $0.40 a share in the quarter,
about 8% better than last year. The company is a cash machine.
Year to date, GE spent $8 billion buying back shares, used $8.6
billion for cash acquisitions, and returned $6 billion to
shareholders in dividends.
With $133 billion in liquid assets, and more coming in every
quarter, GE is likely to continue growing the business through
acquisitions, and rewarding shareholders through stock buybacks and
For all of 2013, Argus Research has a $1.66 a share earnings
estimate. Standard & Poor's expects $1.65 a share. For next
year, Argus has a $1.78 per share estimate and Standard &
Poor's says $1.85 a share.
General Electric is a solid, long-term investment that will reward
shareholders through dividend increases and capital gains. Consider
a 12-month stock price target of $30.
Editor's Note: This
article by John Dessauer was originally syndicated by
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