Why Did This Massive Hedge Fund Company Sell General Electric?

Could General Electric stock bring your portfolio to life?

Feb 17, 2014 at 5:00PM

The latest 13F season is commencing, when many money managers issue required reports on their holdings. It can be worthwhile to pay attention, as you might get an investment idea or two by seeing what some major investors have been buying and selling.

For example, consider Bridgewater Associates, one of the world's largest hedge fund companies. According to its recently released 13F statement, Bridgewater Associates sold all of its shares of General Electric Company (NYSE:GE). Bridgewater's stake in GE had been worth more than $10 million, which sounds like a lot but really was rather minor considering that its reportable stock portfolio's value tops $12 billion. It's not clear exactly why the shares were sold, but in some cases, when a big investment management company sells a small position in a stock, it could merely be a matter of clearing it out of a client's account, upon request.

Still, why might anyone sell General Electric, and why might investors buy and hold it? Let's look at what's going on with the company.

The big picture
For starters, as many people know, it's a mammoth conglomerate, offering turbines, light bulbs, medical imaging equipment, locomotives, subsea drilling systems, underground mining equipment, home appliances, financial services, jet engines, and much more. General Electric has been transforming itself lately, becoming much more of an energy company, with oil and gas now its fourth-largest revenue generator. For example, GE has partnered with major U.S. freight rail operator CSX (NYSE:CSX) to explore the use of liquefied natural gas as fuel for locomotives.

Part of General Electric's transformation involves spinning off its sizable retail finance business, which it's doing via a massive initial public offering. GE Capital contributed about a third of GE's revenue in 2013, though that share has been shrinking some in recent years.

Huge and nimble
General Electric's fourth quarter featured revenue up 3% over the year-ago quarter, earnings per share up 20%, and its order backlog growing by 8% to a record $244 billion. It's worth peering a little more closely at the backlog, which featured orders for equipment rising by 10%, versus 5% for services. That reflects the company's renewed focus on its industrial businesses. Orders for power and water equipment and services grew particularly strongly.

CEO Jeffrey Immelt noted, "We had strong operating performance for the year and are pleased with our execution in 2013, taking $1.6 billion of cost out, growing margins, reducing the size of GE Capital, and returning more than $18 billion to shareholders." That $18 billion took the form of both dividends ($7.8 billion) and stock repurchases ($10.4 billion).

It can be hard for such a huge company (its market capitalization was recently near $260 billion) to be nimble, but General Electric has been thinking outside the box a bit in that regard, investing in and partnering with smaller companies on new technologies and sponsoring competitions to develop innovative solutions. Through its relationships with many private-equity firms, it has access to thousands of small enterprises.

Challenges and opportunity
All isn't perfect at General Electric, though. Following its last earnings report, management noted overall weakness in Europe and in oil and gas drilling in North America. Major integrated oil companies have been careful with capital spending lately, but per CEO Immelt, national oil companies have been actively spending.

If you're not interested in General Electric itself, you might still learn a lot about other companies' fortunes by keeping an eye on GE. Its aviation division, for example, has been a strong performer, which bodes well for flight support specialist Heico (NYSE:HEI), which expects revenue growth in 2014 of between 12% and 14%. The fact that General Electric's mining orders dropped some 60% recently doesn't bode well for others in the mining arena, such as Joy Global (NYSE:JOY) or Peabody Energy (NYSE:BTU), which have noted oversupply issues and low prices as domestic challenges.

You should be interested in GE, though. With a forward price-to-earnings ratio near 14 and a dividend yield of 3.4%, General Electric stock looks rather appealing. Some insiders also think so, as they've recently scooped up lots of shares. CEO Jeffrey Immelt bought more than $1 million worth.

General Electric's not the only dividend powerhouse
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Selena Maranjianwhom you can follow on Twitter, owns  shares of General Electric. The Motley Fool recommends Heico and owns shares of CSX and General Electric. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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