general electric

GENERAL ELECTRIC CO. $14 (New York symbol GE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 10.5 billion; Market cap: $147 billion; Price-to-sales ratio: 0.7; WSSF Rating: Above Average) has moved down in the past few months over concerns about the quality of assets at GE Capital, its finance unit, which accounts for a third of its gross profits. Due to writedowns and other charges at GE Capital, GE’s overall earnings fell 19.1% in 2008, to $1.78 a share (a total of $18.1 billion) in 2008, from $2.20 a share (a total of $22.5 billion) in 2007. Revenue grew 13.3%, to $112.8 billion from $99.5 billion. The company now aims to trim its expenses by $1 billion in 2009. That should allow it to keep paying its $1.24 dividend, which yields 8.9%. A dividend cut is still possible, particularly if GE loses its AAA credit rating, which would drive its interest costs up. But GE should benefit from rising government infrastructure spending. GE’s infrastructure businesses accounted for 54% of its 2008 profits. GE is still a buy for long-term gains.

Plutonic Power Corporation, $2.25, symbol PCC on Toronto (Shares outstanding: 44.2 million, Market cap: $99.4 million), plans to build hydroelectric-power plants in British Columbia. These will be “run-of-river” projects, which produce electricity without damming or flooding. Run-of-river hydroelectric plants do not alter downstream river flows, since all diverted water returns to the river below the powerhouse. Plutonic first sold shares to the public at $0.20 and began trading on Toronto in November 1999. The company owns the rights to 41 run-of-river hydroelectric sites in British Columbia. Two sites are currently under construction (East Toba River and Montrose Creek). The remaining 39 sites are at various stages of evaluation, permitting and development. Plutonic’s power sites are located in southwest coastal B.C., which includes rivers flowing into the Toba, Bute and Knight Inlets. In May 2007, Plutonic and GE Energy Financial Services formed the Toba Montrose General Partnership to finance, build and operate the 19-megawatt East Toba River and Montrose Creek run-of-river hydroelectric facilities. In November 2007, Plutonic and GE Energy arranged $660 million in financing to build the plants. By September 2008, contractor Peter Kiewit Sons Co. had completed 38% of the project, and is on target to finish by the end of 2010....

NISSAN MOTOR CO. $6.87 (Nasdaq symbol NSANY; SI Rating: Above-average) (310-771-3111; www.nissanmotors.com; Shares outstanding: 2.3 billion; Market cap: $15.5 billion) has formed a partnership with the state of Oregon and Portland General Electric to develop a network of electric vehicle charging stations located throughout the utility’s service area. Powered by solar electric panels, these stations will sell electricity for owners of electric vehicles to recharge. The stations may be located at existing service stations to cut costs. Nissan will make available a supply of zero-emission vehicles to the state of Oregon, and promote the development of the network. Nissan Motor is still a buy....

GENERAL ELECTRIC CO. $17.85, New York symbol GE, moved up this week after the company said it would further scale back the activities of its struggling finance division. GE Capital now accounts for about 50% of GE’s total earnings. Through sales of certain financing businesses, the company now aims to reduce GE Capital’s earnings contribution to 30% by the end of 2009. GE now feels it will earn $0.50 to $0.52 a share in the fourth quarter of 2008. That’s down from its earlier forecast of $0.50 to $0.65 a share. These figures exclude restructuring and other charges of up to $1.4 billion. Even with these charges, GE will still earn over $18 billion in 2008. The company also plans to keep paying its $1.24 dividend (6.9% yield) in 2009. GE is a buy....

S&P DEPOSITORY RECEIPTS $87.32 (American Exchange symbol SPY; buy or sell through brokers) are commonly called ‘Spiders’. The fund holds the stocks in the S&P 500 Index. This index is comprised of 500 major U.S. stocks chosen for market size, liquidity, and industry group representation. The 10 highest weighted stocks on the index are Exxon Mobil, Procter & Gamble, General Electric, AT&T, Johnson & Johnson, Chevron Corp., Microsoft, Wal-Mart Stores, JP Morgan Chase & Co. and Pfizer. Expenses for the fund are just 0.10% of assets. If you want exposure to the S&P 500 Index, S&P Depository Receipts are a buy.

We still think high-quality mutual funds with a long-term focus will beat indexes over long periods. If funds invest as we advise — sticking with well-established companies and spreading their assets out across the five main economic sectors — they will tend to lose a lot less than the market indexes in periods when the indexes fall sharply. That’s because big market slides are particularly hard on the hottest, most popular stocks of the preceding market rise, and investing as we do leads you to avoid excessive investment in the hot stocks. Index funds, in contrast, do tend to load up on the hottest, most popular stocks as they rise. That’s because, as they rise, these stocks make up a rising proportion of the index. The most recent example is Potash Corporation of Saskatchewan, which had the highest market cap on the Toronto exchange in June, 2008, on the strength of soaring fertilizer and agriculture prices. The shares have since dropped 70%....

CALIAN TECHNOLOGIES, $8.50, symbol CTY on Toronto, operates in two areas. The BTS division (Business and Technology Services) provides engineering, healthcare and other skilled professional personnel to clients on a contract basis. The SED division (Systems Engineering) offers a full range of hardware and software systems for testing, operating and managing satellite and other communications systems. In the three months ended September 30, 2008, Calian’s earnings rose 27.1%, to $2.7 million $0.33 a share from $2.1 million or $0.26 a share a year earlier. Cash flow per share rose 15.2%, to $0.38 from $0.33. Revenues rose 7%, to $48.9 million from $45.7 million. In the latest quarter, Business and Technology Services revenues rose 7.4%, to $33.7 million from $35.3 million. Systems Engineering revenues rose 6.1%, to $15.2 million from $14.3 million. Stronger demand for Calian’s products and services combined with more efficient project...

GENERAL ELECTRIC CO. $19 (New York symbol GE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 10.0 billion; Market cap; $190.0 billion; WSSF Rating: Above average) earned $0.45 a share in the third quarter of 2008, down 10% from $0.50 a year earlier. That’s mostly due to a 33% drop in profits at GE’s finance division, which accounts for about 45% of its overall earnings. Revenue grew 11.1%, to $47.2 billion from $45.5 billion, thanks mainly to strong demand for power turbines and other energy infrastructure equipment. GE should benefit from the Federal Reserve’s plan to buy back commercial paper from non-banks, including GE’s finance division. The sale of $3 billion of new preferred shares to Warren Buffett plus $12 billion of common stock to the public will also help strengthen GE’s finances, and possibly let it take advantage of acquisition opportunities. GE is a buy.

Despite a stream of nerve-rattling financial news, starting with the failure of the first Congressional bailout package, the Dow Industrials and the S&P 500 managed to hold above Monday’s lows this week until just before Friday’s close. It’s a mistake to read too much into this, of course. But it is encouraging to see both indexes move sideways in this depressing news environment. Market turnarounds often occur in times of high volatility and bad news. Our advice is to resist any urge you may feel to sell good-quality stocks, just because you fear they may go lower. WACHOVIA CORP. $6.21, New York symbol WB, has agreed to merge with WELLS FARGO & CO. $34.56, New York symbol WFC. Wachovia stockholders will receive 0.1991 of a Wells Fargo common share for each Wachovia share they hold. The deal requires stockholder and regulatory approvals....

Some investors worry that Washington’s $700 billion bailout of the banking industry is going to fall apart, and that this will lead to a rise in gold and a drop in the stock market. We think the bailout will go through. The only obstacle to it is the political bickering and posturing that is bound to go into a highly visible effort like this, all the more so just prior to a presidential election. There is always a possibility that the market will move lower from here. Meanwhile, gold will stay volatile. But we still feel stock prices will hit bottom over the next month or two, then move up for six months or more. WASHINGTON MUTUAL INC. $0.16, New York symbol WM, fell over 90% on Friday before the New York exchange halted trading. That’s because banking regulators have seized control of the company. Regulators subsequently sold the assets of Washington Mutual’s main banking subsidiary to J.P. MORGAN CHASE & CO. $48.24, New York symbol JPM. The purchase included branches, deposits and the loan portfolio....