general electric

The stock market put on a huge rise from mid-2010 through February this year, and this left it ripe for a setback. Japan’s earthquake/tsunami/nuclear plant breakdown provided the trigger for that setback. Events in Japan have been horrific for the victims, of course. The Japanese situation could still weigh on the market for weeks or months to come. However, the damage to Japan is far too isolated and local to put the worldwide economic recovery at risk. World economic growth could slow temporarily while multi-national companies re-think their hiring and investment plans, and consumers re-think major purchases. After they complete their re-thinking, businesses and consumers may speed up their spending to make up for lost time. The outcome of Japan’s nuclear problems could have a big impact. If radiation leakage is widespread, it could spur much more environmental opposition to the nuclear industry. That could shift demand from nuclear to natural-gas power plants, particularly since shale gas discoveries and technology have vastly expanded natural gas reserves in North America and around the world. (One key beneficiary here would be our long-time favourite, Canadian gas producer Encana Corp.)...

SPDR S&P 500 ETF $131.21 (New York symbol SPY; buy or sell through brokers; www.spdrs.com) holds the stocks in the S&P 500 Index, which consists of 500 major U.S. stocks that are chosen based on their market cap, liquidity and industry group. The index’s highest-weighted stocks are Exxon-Mobil, Microsoft, Procter & Gamble, Apple, JP Morgan Chase & Co., Johnson & Johnson, IBM, Chevron, General Electric, Wells Fargo & Co. and AT&T. The fund’s expenses are just 0.10% of its assets. If you want exposure to the S&P 500 Index, SPDR...

Exchange-traded funds (ETFs) may have a place in your portfolio. That’s because, unlike many other financial innovations, they don’t load you up with heavy management fees, or tie you down with high redemption charges if you decide to get out of them. Instead, they give you a low-cost, flexible, convenient alternative to mutual funds. ETFs trade on stock exchanges, just like stocks. Prices are quoted in newspaper stock tables and online. You’ll have to pay brokerage commissions to buy and sell ETFs. However, ETFs’ low management fees still give them a cost advantage over most conventional mutual funds. As well, shares are only added or removed when the underlying index changes. As a result of this low turnover, you won’t incur the regular capital-gains bills generated by the yearly distributions most conventional mutual funds pay out to unitholders....

FEDEX CORP., $98.32, New York symbol FDX, warned that severe winter weather and rising fuel costs are hurting its earnings. In its 2011 third quarter, which ends February 28, 2011, FedEx expects to earn $0.70 to $0.90 a share before unusual items. That’s down from its earlier earnings forecast of $0.95 to $1.15 a share. FedEx earned $0.76 a share in the year-earlier quarter. Even so, the company continues to see rising demand for its package-delivery services as the global economy recovers....

GENERAL ELECTRIC CO. $20 (New York symbol GE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 10.7 billion; Market cap: $214.0 billion; Price-to-sales ratio: 1.4; Dividend yield: 2.8%; TSINetwork Rating: Above Average; www.ge.com) is seeing rising demand for its large industrial equipment, such as turbines and locomotives, as the economy recovers. GE’s order backlog is now a record $175 billion. In 2010, GE’s earnings rose 15.4%, to $12.6 billion, or $1.15 a share. It earned $10.9 billion, or $1.00 a share, in 2009. Revenue fell 3.3%, to $150.2 billion from $155.3 billion. However, that’s partly because the company continues to shrink GE Capital, its finance division. GE is a buy.

PLEASE NOTE: This is our last Hotline for 2010. Our next Hotline will go out on Friday, January 7, 2011. VISA INC., $66.90, New York symbol V, fell 16% this week. That’s because the Federal Reserve proposed new limits on fees banks can charge for debit-card transactions. Companies that process these transactions, such as Visa and MasterCard Inc. (New York symbol MA), charge banks a percentage of the transaction’s cost. Right now, the average debit-card fee is 1.14%, or $0.44 per transaction. The Federal Reserve, acting under new legislation to regulate financial companies following the 2008 credit crisis, proposes to cap these fees at $0.12 per transaction. The proposals could also make it easier for new competitors to process transactions....

C.R. BARD INC. $91 (www.crbard.com) aims to improve its efficiency by closing plants and cutting jobs. These moves will cost the medical-device maker $20 million. To put this in context, Bard earned $135.9 million, or $1.43 a share, in its latest quarter. As well, the company plans to borrow $750 million and use the cash to buy back shares. That’s equal to 9% of its market cap. Buy. GENERAL ELECTRIC CO. $17 (www.ge.com) has raised its quarterly dividend by 16.7%, to $0.14 a share from $0.12. The new annual rate of $0.56 yields 3.3%. Buy. MOODY’S CORP. $27 (www.moodys.com) paid $151.4 million for CSI Global Education Inc., the exclusive provider of the Canadian Securities Course, which Canadian stockbrokers must complete before they receive their licenses. The price is equal to 1.1 times the $136.0 million, or $0.58 a share, that Moody’s earned in the three months ended September 30, 2010. Buy.

PEPSICO INC., $65.17, New York symbol PEP, continues to expand internationally. Right now, it gets 45% of its sales from outside the U.S. This week, the company agreed to buy Wimm-Bill-Dann Foods OJSC (New York symbol WBD). Wimm-Bill-Dann is a leading producer of dairy products, fruit juices and baby food in Russia. If Russian regulators approve, PepsiCo will pay $3.8 billion for 66% of Wimm-Bill-Dann. It will then offer to buy the remaining 34%. In all, PepsiCo will pay roughly $5.4 billion. To put this cost in context, the company earned $2.0 billion, or $1.22 a share, in the three months ended September 4, 2010. PepsiCo already has some operations in Russia, so combining plants and distribution networks should save it $100 million a year by 2014....

SPDR S&P 500 ETF $119.95 (New York symbol SPY; buy or sell through brokers; www.spdrs.com) holds the stocks in the S&P 500 Index, which consists of 500 major U.S. stocks that are chosen based on their market cap, liquidity and industry group. The index’s highest-weighted stocks are Exxon Mobil, Microsoft, Procter & Gamble, Apple, JP Morgan Chase & Co., Johnson & Johnson, IBM, Chevron, General Electric, Coca Cola, Google and AT&T. The fund’s expenses are just 0.10% of its assets....

Exchange-traded funds (ETFs) may have a place in your portfolio. That’s because, unlike many other financial innovations, they don’t load you up with heavy management fees, or tie you down with high redemption charges if you decide to get out of them. Instead, they give you a low-cost, flexible, convenient alternative to mutual funds. ETFs trade on stock exchanges, just like stocks. Prices are quoted in newspaper stock tables and online. You’ll have to pay brokerage commissions to buy and sell ETFs. However, ETFs’ low management fees still give them a cost advantage over most conventional mutual funds. As well, shares are only added or removed when the underlying index changes. As a result of this low turnover, you won’t incur the regular capital-gains bills generated by the yearly distributions most conventional mutual funds pay out to unitholders....