General Electric Company (GE)’s Investment Appeal – A SWOT

Acquisitions that can fuel growth

Having sold its stake in NBC Universal, GE is altering its asset mix. One recent buyout worth noting was that of Dresser Inc. in February 2011, boosting its presence in the oil and gas engine and equipment sector.

Threats

A slowdown in the credit or real estate markets

General Electric Company (NYSE:GE) relies on favorable credit conditions and a stable real estate market for profits at GE Capital. In particular, near-zero interest rates and an improving commercial real estate sector have been positives. Any deterioration of this environment would hurt results, as the performance of GE Capital has a major impact on overall results.

Margin compression

As GE’s revenues are growing only modestly, it is dependent on profitability gains for earnings improvements. Thus it is susceptible to competitive pressures, and despite its strong market positions in its power generation sectors that it serves.

Conclusion

GE’s financing unit is the most important piece of the puzzle. Then I look at the performance of the energy business and other industrial units. Finally, investors must be of the belief that acquisitions and product development (other than in aerospace, General Electric Company (NYSE:GE) does not have a sizable R&D budget), will be sufficient to mitigate the impact of weakness in certain markets (of late wind turbines). In my view, GE shares remain a good selection for a long-term portfolio.

Damon Churchwell has no position in any stocks mentioned. The Motley Fool owns shares of General Electric Company (NYSE:GE).