When it comes to investing for the long-term, diversification is the name of the game. The goal is to spread your investments around enough so your portfolio is not too dependent on any one company or sector, but not to diversify so much that you would be better off buying an index fund and saving yourself the commissions from buying so many stocks. Some companies provide added diversification to your portfolio all by themselves, and my favorite of these is General Electric Company (NYSE:GE). Let’s take a look at what General Electric Company (NYSE:GE) can do for your portfolio, and then we’ll see the variety of investments you would have to make in order to replicate its diversity.
General Electric: past and present
Formed in 1892 by a merger of two electric companies, General Electric Company (NYSE:GE) was one of the original 12 companies on the Dow Jones Industrial Average when it was formed. Over the following decades, General Electric Company (NYSE:GE) broadened its business to include lighting equipment, radios, power generation, computing, and more. Through a series of acquisitions, which have occurred more frequently in recent years, General Electric has evolved into a company with many different, but important business, not all of which have to do with electrical products as the company name implies.
The many faces of GE
Currently, General Electric Company (NYSE:GE) operates four divisions (GE Capital, GE Energy, GE Technology Infrastructure, and GE Home & Business Solutions), which can be further divided into eight segments.
Surprisingly, the largest segment of General Electric is GE Capital, which accounts for 31% of the company’s revenue and includes the company’s commercial lending business as well as financial service units for healthcare, media, communications, real estate, aviation, and more. While this segment got the company in some trouble during the financial crisis, causing shares to trade for as low as $5.73, General Electric Company (NYSE:GE) has taken steps to restructure its portfolio and improve the credit quality of its assets.
The next largest segment of GE is Power & Water (19% of revenues), which offers various power generation equipment such as turbines, generators, and services for equipment. Aviation (14%) produces and services jet engines, and is a leader in commercial jet engines, as well as engines for military and private applications.
The company’s healthcare segment (12%) produces various medical imaging and diagnostics products, such as magnetic resonance (MR) and computer tomography (CT) equipment. The Oil & Gas segment (10%) produces drilling and production systems, as well as a variety of equipment for drilling applications.