By Yaser Anwar, CSC of Equity Investment Ideas

One quick thing- Starting from today which ever stock I pick I’m going to include a link to Stock Pickr which shall reveal which institutions are holding the stock. It pays to know who your fellow shareholders are. GE is held by Warren Buffett & 210 other funds.

GE is one of the biggest conglomerates in the world. It is hard for me to dissect each aspect of its business so I’m going to outline the percentage of revenues from the different industries with focus on the transportation business.

• Before we get on let me just give you a quick update on GE’s recent report. GE maintained its top line growth target of 8%, driven by its late cycle infrastructure businesses and GE Capital. EPS growth guidance of 10-13% met expectations.
• Total orders for the quarter were up 15% versus the year-earlier period. The company also finalized the sale of its GE Life to Swiss Re in October.
• GE also guided to 100bps expansion in margin, on the back of improving service mix, benefits from restructuring and inflection points at Plastics and NBCU. For 07, The Street estimates further sales growth of about 7%.

According to Goldman Sachs- This EPS range is also narrower than the usual $0.10, suggesting to us more visibility and potentially setting the stage for GE to beat expectations next year, something that has been missing in the GE story lately. Overall, we found mgmt commentary to be noticeably more confident, characterizing 2007 guidance as “low risk”. Management also reaffirmed 2-3X World GDP core revenue growth, 100%+ cash conversion, 100 bp improvement in operating margin, and 20% ROTC.

Business Categories of General Electric

a) The Infrastructure business counts 29% of revenues & 33% of operating profits
b) The Industrial business accounts for 22.6%R & 11% OP
c) The Healthcare business accounts for 10.5%R & 11.4% OP
d) The NBC Universal business accounts for 10.2%R 13.2% OP
e) The Commercial Finance business accounts for 14.3%R & 18.3% OP
f) The Consumer Finance business accounts for 13.5%R & 13.0% OP

** The US market accounts for about 48% of GE’s sales, 27% of GE’s sales occur in Europe & 13% in the Asia-Pacific region.

(the A-F numbers have been taken of S&P)

Coming on to the Transportation business which is in the Industrial segment of course.

• GE has been the leading supplier of diesel-electric engines in North America, with an estimated 3/4 of the NA locomotive market.
• In the transportation business GE has expanded to include a dramatically surging demand, in particular from EMs, software upgrades to optimize the performance of existing locomotives and a global signaling & dispatch business to maximize railroad velocity, safety and efficiency.
• GE’s international locomotive order backlog has surged from 120 units in 04 to 710 units at the end of 2006, driven by major wins in China ($450 million for 300 China GEVO16 6,000hp Evolutions), Kazakhstan ($660 mill for 310 Kazakhstan GEVO12 4,400hp Evolutions), Egypt ($120 million) and Australia ($70 million). Additional growth applications for the Evolution locomotive platform are believed to exist in Latin America (Brazil), Africa, Saudi Arabia, India and Egypt.
• To sustain this strong potential growth, GE is investing heavily in R&D (4.5% of 06 estimated sales) & is projected to reach $190 mill in 06, up from $120 mill in 03. New avenues for growth to create significantly expanded value for its customers include fuel solutions (Smart Burn), Avionics Optimizers (Loco Cam & Trip Optimizer), Jenbacher Lightweight Locomotives and a few more.
• What I especially like is since its introduction two years ago, GE has reduced the total cost of production for an Evolution locomotive by 9%. From 50 shipments of Evolution locomotives in 04 to projected to reach 750 units in 06, alongside a backlog that has grown to an estimated 1,780 units, up from 1,040 in 04.
• The Street.com was saying that during the quarter, management initiated a cost-cutting strategy in order to improve long-term margins. Also, the company sold its GE Supply and Advance Materials division in order to focus on higher-margin businesses. The market has certainly views these moves in a very positive mannger, evident by the recent advance in the stock price.
• GE’s mngmt. said it continued to build capabilities across the world, with global revenue and developing country growth up 12% and 22%, respectively.

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