GE ticked off one of the items on CEO - Jeff Immelt's list of things to do yesterday by redeeming the 10% preference share investment made by Warren Buffett in the depths of the credit crunch (www.businessweek.com: GE Redeems $3.3 Billion Stake Buffett Bought Amid 2008 Crisis).
From Buffett's perspective a 10% annual return plus a 10% redemption payment on the original $3bn investment looks to have been good business and certainly provided a lifeline for GE as it enabled the company to access a further $12bn from markets in the depths of the credit freeze.
The article goes on to mention that according to a July communication from Chief Financial Officer Keith Sherin, "GE is concentrating on repurchasing common shares and increasing its dividend".
Under Immelt the company has also gone through a significant restructuring which included reducing the risks associated with GE Capital.
Only recently brought into the portfolio (to replace Cisco) at $15.74, the share price is currently $16.23 and allowing for currency movements the investment is up around 5.5%.
Analysts have 20% growth factored in to this years forecasts which pitches the forward p/e at 11.8 times (2010: 15.9) with a 3.3% forecast yield.
Recent information also suggests (www.bloomberg.com: GE Beating S&P Is Profit Goal as Immelt Decade Skirts Abyss) that the company has a healthy cash balance in the region of $91bn (2010: $78.9bn).
My view is that this is a globally recognised brand geared to recovery particularly in emerging markets. And, whilst I like the aerospace exposure with its long investment and return cycle, GE also has firmly established positions in energy, infrastructure, healthcare, consumer products and finance.
So if we can just get out of October in one piece I might be able to look forward to some air miles from GE.
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- Globally Diversified Technology, Growth, and Hedge portfolio update.
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