Dear Mr. Berko:

Please give me your thoughts on General Electric. I bought 100 shares of GE at $69 a share in June 1996, and even though it has split twice since then, it has never returned to that price. Why has the stock done so poorly in the past five years? Do you think I should sell my stock? I’m really frustrated with the stock’s price.

W.P., Destin, Fla.

Dear W.P.:

General Electric Co. (GE-$33.67) is one of about a dozen companies with an A-plus rating on its common stock and a triple-A rating on its bonded debt. GE is also one of the largest and most diversified companies in the universe.

Thirty years of quality revenue and earnings growth plus good dividend increases at GE is testament to its superlative management team and their keen people skills. GE is an awesome, incredible, formidable, respected, envied and a cool-beans company. I don’t own a single share of GE. I never did and can’t fathom why I haven’t. I’ve always believed that GE was a “core” holding and often replied, “GE,” when someone would ask, “Would you please recommend a good long-term growth stock?”

For at least the past three decades, this company’s growth and earnings engine has performed efficiently, maintained its integrity and remained superbly tuned. GE’s ability to do things properly, profitably and admirably has literally made it a “citizen of the world.”

“The General,” as certain employees refer to GE, has such a diverse portfolio of businesses that, with the exception of several remote tribes, there is not a soul on Earth whose life has not changed because of a GE product. GE, inarguably, is one of the most important companies that effectively guided our country through a tumultuous 20th century, and many observers believe GE’s influence will also be strongly felt in the 21st century.

Now my friend Gil Bates, who is truly a very highly self-proclaimed observer of “things,” believes he knows why GE’s share price has been middling and muddled during the past five years. Bates suggests that GE has become so purposefully huge, so logically diversified, that the failure or success of a new product would have no more impact on its bottom line than would one more apple tree to a fall harvest.

Though revenues, earnings and dividends are expected to continue to grow in the low double digits, this growth is considered “normal” for GE, which might be the reason the share price has diddled in its narrow range. Gil tells me that in order for GE shares to outperform the market, there will have to be a confluence of many positive events occurring in a short time frame.

However, your 100 shares of GE that cost you $7,000 are now 600 shares (after two splits) worth slightly more than $20,000, and your annual dividend income is $600, which is almost a 7 percent yield on your original cost. Recognizing that so many other issues, less attractive than GE, have experienced significant appreciation, I can understand your frustration. However, I strongly advise you to stay the course. The stock offers excellent appreciation potential over the coming three to five years, and there’s little downside risk for this high-quality issue. Last year GE earned $1.72 per share and should post earnings of $2 per share in 2006 on revenue growth of better than 12 percent.

General Electric is a wonderfully predictable company. I believe I can, with a good degree of accuracy, predict when the shares will rise significantly in value. I predict that the stock will rise to the low $40s within a month to 30 days after you sell your 600 shares. But if you continue to hold GE, I think that the stock could rise to the high $30s or low $40s by next winter.

GE could very well have a good run this year. It seems that most of Wall Street’s finest believe that 2006 is going to be the year of the large cap (you know, Wal-Mart, Exxon Mobil, Microsoft, Intel) and in my educated, esteemed, erudite and enlightened opinion, I agree.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.

© Copley News Service