This friend of mine had a machinist father that worked at GE and had accumulated a couple hundred shares through work by the mid-1980s. Unfortunately, my friend's father came down with cancer and died not long after he stopped working. After his death, his widow decided to hold on to their GE shares.
As you might guess, this was an extremely smart move. Instead of liquidating their shares in the '80s and getting enough money to maybe buy a new economy car, they held on to their shares as tight as they could, not selling a single share over the past 15 years.
With four 2-for-1 splits and a recent 3-for-1 split between now and then, they now have 48 times the number of shares that they did in the '80s. Moreover, this single modest investment in GE slowly accumulated by a blue-collar worker has made the family millionaires. Buying and holding solid companies is a cornerstone of Foolish thinking, and for me this story cements how a small investment in a solid company, combined with time and patience, can produce phenomenal long-term wealth.
Actually, GE has been rewarding its shareholders for literally decades. GE has paid a dividend every quarter since 1899, and it has increased its dividend payouts every year since 1975. Between steady long-term share appreciation and dividends, those who bought and held GE over the years have done extremely well.
GE shareholders have done well because GE has done well. The company has been on a massive, profitable growth spurt for pretty much the duration of my life. It has wisely cornered many markets that have a high degree of profitability while scuttling those business lines that were bringing marginal returns. Quite simply, GE is the world's premiere conglomerate. Take a look at the following condensed list of GE's business lines:
GE's stated goal is to be the No. 1 or No. 2 company in each of the markets it enters, and it has succeeded in the vast majority of its business lines. It's pretty amazing to think that no fewer than 13 of GE's businesses would be Fortune 500 companies if they were separated from GE. GE is huge, and it has extremely savvy management, as evidenced by the company's positioning and its steadily growing profits.
GE is one whopper of a company. This year, it is on track to have revenue of nearly $130 billion and net income over $12 billion. Just sit there and let those numbers marinate for a minute: $12 billion in net income! Microsoft, by comparison, should earn "only" $10 billion this year. There is a reason for GE's behemoth market capitalization of over $500 billion, and that's because there is a behemoth company supporting the stock.
Looking forward, there's no reason to believe GE can't continue to grow both its top and bottom line. The company is poised to nicely benefit from the efficiencies the Internet and B2B commerce has to offer. If doing business over the Internet slices transactional and procurement costs as promised, GE will see its already enormous profits swell. It's one of the reasons many of GE's businesses are becoming increasingly focused with online commerce.
In summary, between a long and celebrated history of profitability, numerous healthy business lines, and some of the best management in America, there are several reasons to like GE. I think GE will continue to illuminate portfolios of patient investors for many years to come.
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