Well, it is an old-time name and isn’t flashy or trendy, but it has been getting a lot of attention from analysts in the last few months. And you can’t argue with its history: GE (NYSE: GE).
More and more articles are popping up in the money press about GE and why it is a “Buy” again. Most the renewed attention is built around the spinoff of the Capital division, which will raise about $4 billion, and efforts to refocus the company as a pure industrial.
The spinoff is expected to the biggest IPO since Facebook.
If you can remember the 2008 debacle, the Capital portion of GE was a huge drag on its recovery and has held it back since.
GE will retain 80% of the Capital division and still finance aircraft engines and locomotives. But it is expected to be a much more focused industrial without the drag of the retail credit division on its books.
The company will invest $15 billion in innovation through 2015, is expanding its manufacturing horizons through key partnerships and is extending its manufacturing arm over a dozen industries.
Despite its slow performance last year, as far as I am concerned, this is still one of the bluest of blue chips and is worth a second look right now.
Earnings to grow by 7% on flat revenues. Not world-shattering.
But, as it sheds this 20% of the retail capital business and the rest in the next few years, GE will be back as one of the big dogs in the manufacturing and industrial world and, as it always has done, it will make people rich again.
The WD-40 of the Internet
Barron’s calls it the WD-40 of the Internet: Akamai (Nasdaq: AKAM)
This is a company that was formed by an MIT professor and a graduate student that literally keeps the Internet moving. They solved one of the key problems on the net: traffic jams.
AKAM runs the world’s largest cloud operation with 137,000 servers in 87 countries. Up to 30% of all Internet traffic passes through Akamai’s network.
And as video continues to eat up bandwidth, Akamai will continue to be the the grease that keeps it moving.
An increasing wave of high-resolution photos from social-media sites, cloud-based videogames, and more Web video driven by advertiser demand will drive AKAM’s earnings and revenues for many years.
The next big thing for AKAM is Internet security.
Because they see so much of the net’s data they are able to recognize threat patterns from DDoS’s – distributed denial of services attacks – and offer better and earlier solutions. And the fact that their computers are outside firewalls of corporate and government systems, they can prevent attacks before they get in a system.
AKAM has the safety of recurring revenues, strong profits margins, operating margins of 27% and is currently trading at about 22 times earnings, below its 10-year average of 25 times.
The CEO added $1.1 million of the stock to his already huge holding of $186 million worth and, his buying activity has historically been a good indicator of things to come.
The “Slap in the Face” Award: A Twofer
This week we have two. The first goes out to the sell-at-the-bottom crowd, which includes most small investors. The second to Rep. Adam Schiff of California for his comments about safety at the Olympics in Sochi.
First, here’s a very timely comment from one of my favorites, Morgan Housel, and it goes out to those who seem doomed to consistently buy high and sell low and dump stocks at the bottom of every correction, sell-off and market hiccup.
Here ya go:
“Markets go through at least one big pullback every year, and one massive one every decade. It’s what they do. Get used to it or leave.”
Considering the ride stocks have given us in the past month, this one seems pretty much on target for the sell-at-the-bottom crowd.
And now No. 2:
Rep. Adam Schiff (D-Calif.), a member of the House intelligence committee, on Fox News last Sunday, was asked about how dangerous is Sochi for visitors. Here’s what he thinks safe is. He said:
“There certainly are a lot of risks. But I think they’re it’s manageable. If people stay where they’re supposed to.”
Congressman Schiff, are there signs that say where you are supposed to be?
“If they don’t go in charge areas.” I’m not sure what a charge area is.
“Minimize the time in train stations.” I guess Russian terrorists really dislike train travel.
And “minimize the degree to which you demonstrate where you come from.” It wouldn’t be wise to broadcast you’re from the United States.
I guess we need to sew Canadian flags on our backpacks and clothes.
That is not what I call manageable. By the way, he isn’t in Sochi.
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