Industrials

Why GE Is the Best Conglomerate Stock of 2015

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Although it might seem like conglomerates are going out of style, one of the 10 best performing Dow Jones Industrial Average is General Electric Co. (NYSE: GE), which traded up more than 21% year to date as of Friday’s close. No other conglomerate on the index trades at break-even for 2015, and the biggest conglomerate of all is doing much worse than GE.

3M Co. (NYSE: 3M), another Dow stock, traded up 4.6% over the past 12 months as of Friday’s close, but traded down just over 1% for the year to date. Following its latest quarterly report, analysts issued a few downgrades and price target cuts. The consensus price target remains just above $160, a level the company reached last Monday, although it has given some back since then. The high price target is $185 and the low is $138.

3M’s forward price-to-earnings (P/E) ratio is 18.85 and its price-to-book ratio is 8.03. S&P Equity Research recently upgraded the stock to a Buy, while Brean Capital reiterated its Buy rating and $31 price target.

United Technologies Corp. (NYSE: UTX) closed the sale of its Sikorsky helicopter division to Lockheed Martin last Friday and the stock closed at $100.80, well off its 52-week high of $124.45. For the year to date, UTC’s stock closed down nearly 11% on Friday and shares are down about 5% for the year to date. The company’s forward P/E ratio is 15.32 and its price-to-book ratio is 2.93.

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Morgan Stanley recently lowered its price target on UTC shares from $109 to $108 while maintaining the firm’s Overweight rating. RBC Capital cut its rating from Outperform to Sector Perform and lowered its price target from $113 to $110. JPMorgan initiated coverage in early October with a Neutral rating and a price target of $104. The consensus price target is $108.41 and the high target is $125. The low target is $96.

The largest conglomerate, Berkshire Hathaway Inc. (NYSE: BRK-A), has a market cap of more than $333 billion, compared with GE’s market cap of $302 billion, but the Warren Buffett-led company has performed considerably worse than GE so far in 2015. Berkshire Hathaway closed most recently down more than 10% for the year to date, and over the past 12 months it is the worst performing stock of these four, down nearly 5.5%. The stock’s price-to-book ratio is 1.79.

Analysts’ ratings on Berkshire Hathaway are scarce. Barclays in August reiterated a Buy rating and Keefe Bruyette & Woods reiterated a Hold. The stock closed at $203,100 on Friday, in a 52-week range of $190,007 to $229,374.

And how does GE stack up? RBC Capital added GE to its Focus List to Outperform and increased the firm’s price target from $30 to $32. Barclays reiterated an Outperform rating and made an identical target price move. Bernstein left its Outperform rating on the stock and raised its target price from $32 to $33. S&P Equity Research reiterated its Buy rating and $34 target.

GE made our list of 10 stocks to own for the next decade on the strength of its dividend yield (3.07% as of Friday’s close) and the company’s success in shedding its financial businesses. If anything, GE’s position has solidified since then.

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