2011: The Year General Electric Got Its Imagination Back

In these waning days of 2011, there's a chill in the air and snow in the forecast. What better time of year to curl up by the fire and ponder: What went wrong with the stocks you picked back in January? What went right? And should you keep these stocks in your portfolio, or go out and find something new?

That's what we aim to do today, as we flip back the calendar, and consider the year that was at General Electric (NYSE: GE  ) .

A few Foolish facts about General Electric

Year-to-Date Stock Return (5.4%)
P/E 13.9
Dividend Yield 4%
1-Year Revenue Growth (4.2%)
1-Year Profit Growth 8.3%
CAPS Rating (out of 5) ****

Source: Motley Fool CAPS.

What happened at General Electric this year?
There's no two ways about it: 2011 has not been a good year for GE stock. As the Dow Jones Industrial Average ekes out a small gain for the year, GE's still mired in the red, lagging the performance of its home index by a good 6 percentage points. And yet, I can't help but wonder if this "underperformance" masks something deeper, and better, going on behind the scenes at GE. Let's review.

Probably the biggest hurdle GE had to overcome this year was the legacy of its ill-fated move into commercial lending. The company was burnt to the tune of billions of dollars worth of losses by this gaffe. GE took significant steps to extricate itself from the business in 2010, and now plans on accepting online retail deposits that it hopes will cover its commercial lending and leasing business in North and South America.

Then, deftly doffing its banker's green eyeshade in favor of an oilman's hardhat, GE got back to what it's always done best: Building things. Making things. Creating real products for real people. In a series of acquisitions begun (again) in 2010, the conglomerate had already cobbled together an oil and gas equipment empire to rival the likes of Schlumberger (NYSE: SLB  ) and Tyco. 2011 saw the crown jewel of this empire put in place, when GE beat out Halliburton (NYSE: HAL  ) in the contest to capture John Wood Group's oil well support division. Accomplishing this, GE Vice Chairman John Krenicki declared: "We've got an industry-leading drilling and production business ... mission accomplished!"

GE: Imagination gets back to work
And yet, as we've seen this year, this was just one mission of many. You've probably heard about GE's landmark deal to purchase 25,000 electric cars from General Motors (NYSE: GM  ) , Ford (NYSE: F  ) , and Nissan, right? What you may not have heard is that this is just the start of GE's plan for global domination of the e-car phenomenon.

You see, GE isn't just buying electric cars to build up its "green" credentials. It's not doing this because "Electric" is part of its name, either. What GE really wants to do here (I believe) is to place itself at the forefront of a new industry -- and build a new infrastructure of electric car charging stations to support it. To my way of thinking, GE's purchase of 25,000 e-cars was therefore an acceptable "loss leader" -- an investment made to help jump-start the industry. The move was aimed at providing some financial support and incentives for carmakers to keep the faith and keep trying to convert consumers to the concept of driving electric cars.

Next step: world domination
GE could now be looking at a great way to grow going forward: reinventing the way America drives to work. Seeing as it's already made a billion-dollar commitment to the project, I wouldn't be too surprised to see GE deploy even more of its $30 billion "reinvention fund" to support its latest move -- by rolling up smaller, competing e-charger-makers like AeroVironment, for example, or perhaps taking a stake in e-car pioneer Tesla (Nasdaq: TSLA  ) alongside Toyota, Daimler, and Panasonic.

In fact, GE is already making unconventional moves in this industry. Just last week the company announced it's teaming up with Amazon.com (Nasdaq: AMZN  ) to sell its WattStation car charger directly to consumers. (And hey! At $1,099 a pop, each WattStation sold entitles you to free shipping!) I for one did not see that one coming.

Then again, maybe that's how imagination works. Here's hoping GE can make it work for its shareholders in 2012.

I believe GE's does have a chance of making it work... but here at The Motley Fool, our all-star analysts think they've found a stock that can do even better in the New Year. Find out which company our experts like best in our new free report: "The Motley Fool's Top Stock for 2012." Thousands have already requested access and it'll only be available for a limited time. Simply click here -- it's free.

Fool contributor Rich Smith holds no position in any company mentioned -- though he'd love to buy some GE just as soon as Fool disclosure rules permit. Click here to see his holdings and a short bio.

Motley Fool newsletter services have recommended buying shares of Ford Motor, Tesla Motors, General Motors, and Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (2) | Recommend This Article (12)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 20, 2011, at 3:31 PM, F2JP wrote:

    Hey, will somebody send a copy of this article to Morgan Stanley Analyst Adam Jonas? He needs to get a clue...

  • Report this Comment On December 26, 2011, at 11:19 PM, DonkeyJunk wrote:

    I think electric cars are certainly going to be part of the future, but I think the future of the American workplace, unless you're some kind of tradesman, is in the home.

Add your comment.

DocumentId: 1745919, ~/Articles/ArticleHandler.aspx, 4/16/2014 6:58:52 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement