General Electric Company (NYSE:GE), Siemens AG (ADR) (NYSE:SI), and ABB Ltd (ADR) (NYSE:ABB) are a trio of industrial giants helping to lead a new round of the industrial revolution. Investors can tag along as they bring technology to the manufacturing process.
There was a time when an assembly line was the height of modern technology. While we’ve come a long way from that point, there is still a large divide between manufacturing and technology that the industrial giants above are working to bridge.
For example, a recent Wall Street Journal article led off with a story about technology at a General Electric Company (NYSE:GE) battery plant that sent emails to a manager at home alerting him of a power outage. From home, the manager was able to review a schematic of the plant and watch the progress of the storm from video cameras at the facility.
From a gee whiz angle, that’s amazing technology. However, taken another step, it helps explain why this is so important. It was a real time account of what was going on at the factory and how the event would impact performance. For example, the article noted that the machines had to reboot, which idled production. With that knowledge, General Electric Company (NYSE:GE) could increase production immediately to make up for the delay.
The next big issue is that the manager was home, not at the facility. While GE’s technology won’t eliminate the need for humans, it does potentially reduce the need for management and high-skilled workers on a factory floor because they are an automated text message or email away.
General Electric Company (NYSE:GE) owned that battery plant, but it doesn’t keep its technology to itself. The company is one of the world’s largest industrial firms, helping customers operate more efficiently and to bridge the gap between technological innovation and old-world manufacturing.
The stock has run up over the past year or so as investors have grown more comfortable with its changing business. After the disproportionately large finance arm forced the company to take a government bailout and cut its dividend, investors rightly became skeptical of GE’s widows and orphans status.
Since that time, however, General Electric Company (NYSE:GE) has refocused around its industrial core. It sold NBC and has been slowly trimming its reliance on its finance arm. That said, GE should always have a finance arm to help its customers afford its large and expensive products. So investors need to watch the progress here, but shouldn’t expect an exit from the space.
GE currently yields around 3.3% and has been able to grow both its bottom line and dividend again. The stock still has plenty of turnaround potential.
Less finance risk
Siemens AG (ADR) (NYSE:SI) is very similar to General Electric Company (NYSE:GE) is size and purpose. The company, however, didn’t go through the same harrowing experience as GE. That’s because its finance arm has historically focused on supporting Siemens AG (ADR) (NYSE:SI)’ core. That means helping customers finance Siemens AG (ADR) (NYSE:SI) purchases, not providing things like mortgages.
The company’s shares yield around 2.9% and are off of their recent highs in the $140 range. So, there is some upside potential. There are two headwinds here, however. First, Europe represents more than half of the company revenues. Since that area is still mired in a recession, the company’s top line will remain under pressure over the near term.