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General Electric (NYSE:GE) is a world-class company. I consider it a must-own stock for either a regular or retirement portfolio. I would never bet against GE over the long haul. However, the fact that GE remains a go-to stock means other interesting opportunities in a similar space might get overlooked. They shouldn’t. They are great buys.
Conglomerates offer diversification for your regular or retirement portfolio. If one segment of their business suffers, it is unlikely others will. So you have that protection as well as the possibility for long-term growth in many other segments.
Legendary Conglomerates for a Safe Portfolio
I love United Technologies (NYSE:UTX) for exactly this reason.Its boring name causes many investors to gloss right over the stock without even considering what it is or what it does, or the fact that it is one of the Dow Industrials.
However, like General Electric, it has a presence in many sectors. These include elevators, heating, ventilating, air conditioning, refrigeration systems, controls, services, and energy-efficient products for residential, commercial, industrial, and transportation applications, electronic security and fire safety products, Pratt & Whitney aviation, Hamilton Sundstrand aerospace products and Sikorsky helicopters.
It’s also a great stock for covered calls.
Another company looks much the same. It’s called 3M (NYSE:MMM). You use its products on a daily basis, and if you look in your home, I guarantee you find at least one of the following: 3M glue sticks, CD-ROMs, Post-It Notes, Scotch Cassette Deck Head Cleaner, Nexcare bandages, Scotch tape, Oxy Carpet Cleaner, O-Cel-O Sponge cloth and Scotch-Brite.
Other things you might not use as much but others do: medical and surgical supplies, drug delivery systems and food safety products, computer screen filters, reflective sheeting for transportation safety, commercial graphics sheeting and systems, mobile interactive solutions, personal and commercial protection products, packaging and interconnection devices, and insulating materials.
Now let’s look at their respective valuations. United Technologies’ five-year annualized earnings growth is 11.3%. At a stock price of $109, on FY 2014 earnings of $6.86, UTX stock presently trades at a P/E of 16. United Technologies carries $6 billion in cash and $17.8 billion in debt. Trailing 12-month free cash flow was $5.5 billion, and UTX pays a 2.2% dividend.
General Electric’s five-year annualized earnings growth is 7.1%. At a stock price of $26, on FY 2014 earnings of $1.37, GE stock presently trades at a P/E of 16. The company has $133 billion in cash and $217 billion in debt. Trailing 12-month free cash flow was $14 billion, and GE pays a 3.5% dividend.
3M’s five-year annualized earnings growth is at 12%. At a stock price of $144, on FY 2014 earnings of $7.48, MMM stock presently trades at a P/E of 19. 3M has $4.3 billion in cash and $5.3 billion in debt. Trailing 12-month cash flow was $4.2 billion, and MMM pays a 247% dividend.
The numbers are not that dissimilar. Any of these are great choices.
Lawrence Meyers owns shares of GE.
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