Why GE Is the Best Conglomerate Stock of 2015

November 9, 2015 by Paul Ausick

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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