BusinessWeek has an article from Gene Marcial on how General Electric (GE) could be a value investment. I see GE as a good value and should stabilize once the financial markets settle down. Could GE Be a Cheap Global-Comeback Play?

General Electric (GE) has come to symbolize the jarring impact of the swift deterioration of the global financial system and darkening economic outlook. Shares of the once-mighty Wall Street kingpin have tumbled to multiyear lows, as analysts have grown impatient with the giant industrial and media conglomerate's turtle-paced growth. There is also a fair amount of anxiety about the health of GE's finance operations. These factors have prompted many of its Wall Street followers to downgrade the stock and scale back their earnings and sales forecasts for 2008, 2009, and 2010.

But the nasty drubbing that GE has suffered—which took its stock price from a high of 42 a share on Oct. 31, 2007, to an 11-year low of 17.83 on Oct. 24—may now have moved its besieged shares from the "unwanted" stock category to the "bargain" bin. The shares may not only be luring buyers because of GE's depressed p-e ratio, but also because of what CEO Jeffrey Immelt and his management team have been doing to improve the company's liquidity, partly by repositioning its finance portfolio and restructuring the company.

HOW THE BULLS SEE IT
The stock, which traded at 19 on Oct. 31, is trading at depressed 1997 levels, although it had more than doubled earnings since that time, significantly improving its business portfolio. Over the last seven years, GE sold its life insurance, mortgage insurance, bond insurance, reinsurance, and materials businesses. For a while, rumors swirled that GE might also unload NBC. But Immelt publicly said it would hold on to the media-TV leader.

At its current price, GE is trading at about 9.6 times 2009 estimates. The last time it traded at that p-e was in 1982. GE's price-earnings multiple was as high as 50 in 1999.

SHORT-TERM LIQUIDITY PROBLEMS LICKED
Meanwhile, GE has taken several steps to strengthen its capital and liquidity position. It raised $15 billion in cash, including the sale of $3 billion in preferred stock to Warren Buffett's Berkshire Hathaway (BRKA). GE is also benefiting from some of the government's rescue programs.

"We believe the stock remains attractively valued," says David Bluestein, an analyst at investment firm UBS, who rates GE, a client, a buy. Earnings could rebound quickly and sharply once credit-market conditions stabilize and general economic conditions begin to improve, he adds. GE has one of the best infrastructure franchises worldwide, says Bluestein, with solid organic growth rates, exposure to favorable secular trends, and a large installed base of service businesses.

HEALTHY CASH FLOWS AHEAD
"GE's valuation is depressed mainly due to the financial crisis that has called into question the balance sheets of even the most creditworthy institutions," notes Richard Tortoriello, an analyst at Standard & Poor's, who rates the stock a hold, with a 12-month price target of 25 a share.

The diversified company remains a vast enterprise, with products and services ranging from aircraft engines, power generation, water processing, media and entertainment, and security technology. GE is a one-stop shop for playing the global economy. So if you believe a recovery is in the cards, it could be an inexpensive way to bet on a comeback.

Disclosure: The Div Guy owns shares of GE at the time of this post.