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Industrials Kicking Rear and Taking Names

David Becker
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Industrials have been reporting very strong earnings and when the market volatility retreats, they are likely to be led higher by GE.

General Electric Co. (NYSE:GE) operates as an infrastructure and financial services company worldwide. The company has many segments including power, healthcare, jet turbine and water.

GE has declined nearly 10% this past week, despite robust earnings. The company’s headline EPS of $0.53 was in line with consensus estimates. Higher-than-expected restructuring and corporate expenses were offset by larger-than-expected gain in GE Capital and slightly lower industrial tax rate. GE continues to benefit from its Simplification initiatives and a positive value gap.

The 52-week range of GE is $ 21.11 – $28.09, and the stock hit a fresh 52-week high at the end of December. Earnings increased 20% in the latest quarter and the 3-year growth rate of earnings positive 8%. Sales were up 3% quarter over quarter and the three-year growth rate of sales was flat. The company has a very attractive dividend yield of 3.4% and a robust profit margin of 11.8%.

Recent insider buying makes the stock look attractive. James Rohr a director purchased 10K shares of the company stock for a total value of 260K on January 21, 2014. Additionally, director William Beatie purchased 2K shares of the stock on January 21, 2014 for a total value of 52K. There were no insider sales for GE in the month of January.

The technical shows a stock with negative momentum that is declining after a robust run in 2013. Support is seen near the 200-day moving average near $24.30 which should hold. The MACD is printing in negative territory reflecting negative momentum on the stock price. The RSI (relative strength index) which is an oscillator that measures momentum along with overbought and oversold levels is printing near 24, which is in oversold territory below the trigger level of 30 and could foreshadow a reversal in the stock price.

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