07/22/96 'YOU CAN'T GO WRONG WITH GE'

'YOU CAN'T GO WRONG WITH GE'

In Wall Street's current nervous state, it's important to hold stocks you think will outscore the market--on its way up or down. The idea is to snap up the shares of companies that dominate their industries and whose earnings picture looks strong.
One such property: General Electric (GE). ``In this type of market, you can't go wrong with GE,'' argues investment manager Steve Leeb, who figures it remains undervalued even at its current price of 84 a share--up from 55 a year ago. GE is a much better buy than any of the diversified mutual funds or index funds around, says Leeb, editor of the newsletter Personal Finance.
Leeb notes that GE's price-earnings ratio is 19, based on estimated 1996 earnings of $4.40 a share vs. an average p-e of 17 for the Standard & Poor's 500-stock index. But that p-e is low for a stock like GE. He figures the price will hit 110 in a year.
One very impressive thing about GE, he says, is that ``it's hard to find any fundamental benchmark on which it doesn't excel.'' The company, he notes, is a powerhouse in every market it's in, from electrical appliances to TV broadcasting. GE's financial-service operations is the largest contributor to the top and bottom lines: Its GE Capital unit generated 38% of last year's revenues of $70 billion and 32% of the $6.5 billion in earnings. A big part of GE's growth, he says, will come with the expansion of the world's emerging free markets.
The simple bullish case for GE, Leeb explains, is that it generates a lot of excess cash--cash flow that's left after capital expenditures, taxes, dividends, and interest payments. Such free cash flow is expected to amount to $5 a share, or $8 billion total, by the end of next year. The company could use this cash to increase dividends or repurchase shares. He figures that, by the end of this year, GE will have repurchased 90 million shares since 1995.
Another bull on GE, Jennifer Pokrzywinski, an analyst at Morgan Stanley, says: ``We consider GE a get-rich-slowly stock--a core holding.'' She notes that GE outperformed the market fairly consistently from 1985 through 1995, with compounded annual growth rate of 14.8%, compared with 11.3% for the S&P 500 (before dividends).
Pokrzywinski expects GE earnings in the coming five years to grow at least 12% to 14% a year vs. a projected 8% average for the S&P 500.

BY GENE G. MARCIAL