In the August portfolio update the performance of the 3 was as follows:
| YTD | 20 Months | ||
| Apple | $385.10 | 14.46% | 95.36% |
| Microsoft | $26.55 | -8.83% | 5.75% |
| Cisco | $15.53 | -26.38% | -27.76% |
| -3.2% | 23.8% |
There have been a couple of small dividends from Cisco and Microsoft and the exchange rate hasn't really been a factor so its clear that Cisco has proven to be a drag on performance. But, as detailed in the August and July updates I had resigned myself to holding what is still a profitable company in the hope that it could eventually manage analysts expectations and return to growth despite competitive threats.
However, given the current turmoil in which a rock bottom Cisco hasn't really fallen by much further it seemed to be too good an opportunity not to bring in a company with, dare I say, more reliable prospects.
The company in question being General Electric which has fallen to a similar valuation on a 2 year view with its forecast sub 10 price earnings for 2012 and has gone through a significant reshaping of the business since Jeff Immelt, the CEO, joined the company just 4 days before 9/11 reshaped the world..
The company in question being General Electric which has fallen to a similar valuation on a 2 year view with its forecast sub 10 price earnings for 2012 and has gone through a significant reshaping of the business since Jeff Immelt, the CEO, joined the company just 4 days before 9/11 reshaped the world..
Sat on a cash pile of $91bn (according to Bloomberg in a recent interview with CEO Jeff Immelt http://www.bloomberg.com: GE Beating S&P Is Profit Goal as Immelt Decade Skirts Abyss), and with double digit earnings growth forecast for the next 2 years there seems to be some promise in them.
A key goal in the next two years is profit growth that beats the Standard & Poor’s 500 Index, he said in an interview. “We feel like we can deliver for investors.” (http://www.bloomberg.com: GE Beating S&P Is Profit Goal as Immelt Decade Skirts Abyss).
The shares have fallen around 20% in the current shake out given their position as a manufacturer geared to domestic and global markets. But, given the various references made to them in recent posts with regard to the 737 Max and A320 neo (and its leading position in large civil engines) I am starting to think that the CEO might just be turning the company around.
Anyway, Cisco has gone at $15.53 and GE has come in at $15.73 with the added benefit of a forecast 3.6% yield (or 3.06% less 15% withholding tax).
Significantly, I think that is the first sale from the portfolio since I starting writing my thoughts but am happy that it puts the portfolio into a stronger position particularly with GE's position as a bellweather of the US economy due to its size and position as a manufacturer. This comes with the added benefit of global markets and a significant geographic spread of revenues.
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