GE: Get It While It's Cheap
Carl Domino, president of Northern Trust Value Investors, likes to buy beaten down shares of quality growth companies. He thinks General Electric (GE ) now falls under that category, in part due to rumors of accounting issues that have surfaced in light of the Enron mess. Domino has taken advantage of GE's drop from 53 a share in mid-May to 36.95 on Feb. 6, 2002. "This was the first chance we got to buy GE at a steep discount," says Domino, who notes that GE is one of only a handful of companies with a triple-A-rated balance sheet. "GE is an ironclad, blue-chip growth company that isn't being valued as such," he says. Adds David Roberts, a Northern Trust Value analyst who tracks GE: "With the witch-hunt going on for other Enrons, GE has been beaten down unjustifiably, since there isn't any evidence that an accounting problem exists." At 36, GE is trading at 21 times estimated 2002 earnings of $1.65 a share. It is cheap based on its history of earnings growth, sales, cash flow, and balance-sheet measures, says Roberts. GE CEO Jeffrey Immelt on Feb. 5 reaffirmed his profit forecast of a 17% to 18% earnings leap in 2002, to from $1.65 to $1.67--well within analysts' estimates as surveyed by Thomson Financial/First Call. Roberts' 12-month GE price target: 47.
By Gene G. Marcial