Dear Mr. Berko:

Dear P.W.:

I posilutely strongly believe General Electric Co. (GE-$20.44) should be a core holding in every long-term growth portfolio. This massive, $145 billion conglomerate derives revenues from its expertise in business and consumer finance; appliances; energy; health care; power distribution; oil and gas; aviation; lighting; nuclear power generation; water systems; marine and military engines; steam, wind and gas turbines; global banking; real estate financing; medical diagnostics; pumps; pipelines; compressors; valves; locomotives; chemicals; infrastructure construction in more than 105 countries, and the list just goes on and on.

This portfolio of businesses plus extremely talented management allows GE to earn healthy returns in most of its markets.

GE now has a heavy concentration on clean-energy products, including the design, manufacture, sale and installation of gas and wind turbines, and management’s ability to combine businesses with strong synergies lets GE make significant investments in new and expanding sectors with less exposure to risks than its competitors.

Its legendary global presence gives management critical information about its competitors, giving GE a leg up in emerging markets.

Prior to the recession of 2007-2009, GE enjoyed net profit margins of 12 percent to 13 percent. After the boom went bust, revenues crashed 25 percent in 2009, and margins fell to 7 percent. Revenues are still a long way from the peak of $185 billion, but net profit margins should reach a record 13.4 percent by 2014, and per-share earnings should increase magnificently to $2.55.

Several fine analysts believe the dividend could be $1.05 per share by 2014, and the stock price could be in the low $40s.

Yes, GE had net income last year of $14 billion and didn’t pay a peso in federal taxes, but that doesn’t make GE a villain. Show anyone how to legally avoid paying taxes, and they’ll hop on it faster than a duck on a June bug.

There are two reasons GE paid no federal taxes. (1) GE Capital, thanks to Goldman Sachs, Merrill Lynch and other Wall Street lovables, lost billions in the financial crisis. Like any company with tax-loss carry-forwards, GE used these losses to reduce its tax bill. (2) The second tax break is a horse of a different feather. GE has a tax division of 977 employees dedicated to finding creative loopholes. GE also employs 19 lobbyists who often buy boxes of chocolate and steak dinners for members of the House and Senate, who then approve the loopholes. As a result, GE moved billions of profit dollars to its nontaxable overseas account.

GE is one of many corporations that avoid taxes in this manner. This episode will have no more effect on the price of GE’s stock than would the advent of another fly to a slaughterhouse.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or email him at malber@adelphia.net. ©2011 Creators.com