The chase for high-beta stocks appears to be fading at this juncture, as we are seeing a shift in the risk profile to lower-beta and more conservative large-cap stocks in the stock market.
After the staggering gains made by technology and small-cap stocks in 2013, it’s time to take a prudent approach to the stock market and refrain from chasing risk at this time.
We are seeing a move to consumer staples stocks that tend to fare reasonably well in both up and down stock markets.
While I favor small-cap stocks in an up stock market, the current tension in the stock market makes it dangerous to pursue risk. This is a time you need to be in defensive stocks.
The big banks, consumer staples, and industrial sectors look decent for those wanting to continue to invest at this time. Momentum and growth should be avoided for now.
If you are looking for a singular stock market play that offers diversity and a defensive approach, take a look at time-tested General Electric Company (NYSE/GE), which has offered investors steady returns in the majority of periods since its beginnings in 1892.
General Electric (GE) is precisely what you want in this type of market. It’s extremely well diversified across many industries and geographical areas around the world.
The company prides itself on producing steady results to shareholders. Its management strategy is to hire CEOs for 20-year time spans that allow for stability.
The company isn’t going to make you rich in a short period of time in the stock market, but it will offer steady growth, dividends, and some capital appreciation. It’s the kind of stock you buy and leave in your portfolio for decades.
GE builds products and solutions for both consumers and commercial enterprises, including kitchen appliances, aviation engines and systems, medical imaging solutions, healthcare products, advanced power systems, and energy management.
The company aims to be consistent in every facet of its diversified businesses.
The price chart of GE from 1964 to today (pictured below) reflects the largely consistent rise in the stock, with some exceptions over the past decade, including a relapse in 2009 when the stock fell to the $5.00 level prior to rallying to the current $25.00 level, up four-times higher. Imagine: by buying GE, your $50,000 investment in 2009 would be worth a quarter of a million dollars today.
Chart courtesy of www.StockCharts.com
In 2013, GE reported revenues of $146 billion and earned more than $13.0 billion in profits.
The growth may not look that great at first glance, but it’s all about the long term with GE. Annual revenues are estimated by Thomson Financial to grow at 2.7% this year and 0.1% in 2015.
GE will be around for another 100-plus years, which cannot be said for some of these highflying technology companies.
Over the long term, while you won’t get rich in the stock market just holding GE; you’ll be able to sleep at night.