Unlike Goldman Sachs
The GE Capital anchor
GE's revenues and profits in the fourth quarter of 2009 and for the full year declined substantially with respect to the prior year periods. The company's financing unit, GE Capital, was the largest anchor on growth. At the beginning of last March, I wrote that I thought it "highly unlikely that GE Capital will earn $5 billion this year, as the firm projects." In fact, GE Capital earned less than half that amount, as profits shrank by nearly three-fourths year-on-year.
As a self-respecting CEO does, Jeff Immelt put a positive spin on things: "Every segment at GE Capital was profitable with the exception of Commercial Real Estate." The trouble is, as I pointed out yesterday, there are indications that the commercial real estate sector will continue to deteriorate this year.
There are other businesses
It's not all gloom-and-doom, though, as GE's total backlog of equipment and services rose to a record $175 billion. GE's first-class industrial businesses look well positioned to benefit from infrastructure spending in emerging markets.
A better alternative to GE shares
GE shares could well outperform the Dow over the next three to five years as the company returns to growth. However, another conglomerate is, in my opinion, a clearly superior alternative for your money: Warren Buffett's Berkshire Hathaway
In the next few years, GE will derive most of its growth from overseas markets. Smart investors are positioning themselves the same way. Global Gains advisor Tim Hanson identifies the top markets right now.