11 Great Insights From General Electric Company's Shareholder Letter

Here's what GE had to say about 2013 and the road ahead.

Mar 11, 2014 at 6:45PM

General Electric published its annual report on Monday, accompanied by CEO Jeffrey Immelt's letter to shareholders. Since GE serves as a bellwether for the U.S. economy, it's an interesting read for investors of all stripes. For GE investors, it's particularly revealing. As I pointed out a few months ago, the year 2013 was a tumultuous one for GE. It started out borderline dismal but by most measures finished with a bang. Here's a snapshot of Immelt's thoughts on everything from GE's investments in big data to the promise of global capitalism:


GE's CEO Jeff Immelt. Source: General Electric

On the economy driving GE's results: "Frequently I tell investors that if we ever see a U.S. economy like the ones we had in the '90s, GE will have earnings upside. While we don't expect that soon, there are signs that the U.S. economy is getting a little better each day."

On reining in a sprawling conglomerate: "We are transforming GE around the 'culture of simplification.' This is not a reorganization or an initiative. Rather, it defines the way we make decisions, work together and work with our customers. We are focused on efficiency, speed and market impact. We are driving decisions closer to markets and making our teams accountable for outcomes, not process."

On simplification promoting accountability: "We will still make a few mistakes. But the biggest risks at GE are the inability to seize market opportunities, layers that block reality and leaders who are not personally accountable. Simplification is making us more competitive."

On positioning for future growth: "Investment in infrastructure is expected to reach $60 trillion by 2030. Success requires technology, services and execution delivered at scale across a massive global footprint. With more than $100 billion in revenue and nearly 16% margins, we are the largest and most profitable infrastructure company in the world. Our goal is for infrastructure earnings to be 70% of GE's total."

On cutting down the banking biz: "We have a solid franchise in the private label credit card business, but 
it is a step removed from GE Capital's strength of lending to industrial middle-market companies. By 2015, we expect financial services should be 30% of our earnings."

On the next big health care opportunity: "In December, I sat with four of the most pre-eminent brain scientists in the U.S. We discussed the advanced technology around treating diseases of the brain, from Alzheimer's to traumatic brain injury. They feel that GE can have a big role in treating brain disease through our leadership in diagnostics. This is one of the most interesting, promising and challenging horizons in health care...We are just the company to advance brain science."

On data taking over manufacturing: "We believe that every industrial company will become a software company; that ultimately deep domain knowledge is tougher to come by than writing code."

On past results: "Our total shareholder return expanded by 38% in 2013, ahead of the market. We added $64 billion of market cap and, at $282 billion, are the sixth most valuable company in the world. At year-end, we increased our dividend by 16%."

On future goals: "By 2016, we expect to have 70% of GE's earnings from our industrial businesses. We expect to have industrial margins and returns exceeding 17%, at the top of our peers. We expect GE Capital to generate good returns while delivering cash to the parent. We expect to generate more than $90 billion of cash to allocate, returning the majority of that to you in dividends and buyback. And, we plan to grow EPS each year."

On the promise of capitalism: "Most countries want the same things -- competitive capabilities that create jobs, sense of pride and progress that lifts all people up. They want to tap into the global marketplace for progress, ideas, and the capability to export their goods."

Source Flickr Jeffrey Turner

Source: Flickr/Jeffrey Turner

On betting his bonus on GE: "I am investing right alongside of you. I have invested my entire bonus in GE stock and have purchased 145,000 shares so far this year. I now own 2 million shares outright, with another 2.8 million available if we perform. Like the rest of our leaders, I believe in GE."

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Isaac Pino, CPA owns shares of General Electric Company. The Motley Fool owns shares of General Electric Company. 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.

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.

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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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