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United Technologies Corporation (UTX), General Electric Company (GE) or Neither: Who’s the Best Conglomerate to Invest In?

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There are a number of diversified products company in the markets; companies that make products for a variety of industries. These companies have impressively diverse revenue streams, which usually afford them low-volatility, making them great investment opportunities despite the economic backdrop. What’s more is that all of these stocks also pay a dividend.

Five of the best stocks in the industry include General Electric Company (NYSE:GE), Honeywell International Inc. (NYSE:HON)United Technologies Corporation (NYSE:UTX), 3M Co (NYSE:MMM) and Siemens AG (ADR) (NYSE:SI).

United Technologies Corporation (NYSE:UTX)

Top conglomerate pick

GE gets around 30% of its revenue from GE Capital, which includes consumer lending and financial solutions. Although this arm struggled through the financial crisis, it’s encouraging that GE is moving away from the struggling financial sector, including the announcement that it plans to sell its entire stake of Thailand’s BANK OF AYUDHYA (PINK:BKAHF).

Power and water (19% of revenues) is another key segment of General Electric Company (NYSE:GE)’s, which includes producing various turbines, generators and renewable energy solutions. GE also provides products to the oil and gas industry (10% of revenues), which includes equipment for onshore and offshore projects. GE’s other key growth segment is healthcare (12% of revenues), which includes medical imaging and information technologies.

One of GE’s best growth initiatives lies in the energy markets. The company should see global growth thanks to increased demand for energy production and fossil fuel alternatives. GE already offers one of the most efficient and reliable wind turbine fleets and various efficiency improving power plant tools. GE also has a strong international presence, where more than 50% of total revenue is generated from emerging markets.

Honeywell International Inc. (NYSE:HON) is another revenue-diversified company, with 40% of revenue from control solution (environmental, sensing and security controls), 30% from aerospace, 16% from performance materials and 10% from transportation. Although Honeywell has a low beta, I believe there are better industry picks given the company’s over-weighting toward aerospace, which is tied heavily to defense budgets and discretionary spending. General Electric Company (NYSE:GE)’s aviation segment only makes up 13% of revenue. However, a positive is that Honeywell hopes to enter the fast growing healthcare segment with its December 2012 acquisition of bar-code manufacturer Intermec Inc. (NYSE:IN).

How does GE stack up against some of the conventional economic bellwethers? Speaking to the diversity is the fact that GE’s beta is lower than most of the conventional economic bellwether companies.

Beta GE Honeywell Caterpillar Deere & Co. Joy Global
15-year 1.26 1.31 1.40 1.12 1.92
3-year 1.34 1.34 1.83 1.36 1.72
1-year 1.05 0.89 1.62 1.16 1.46

General Electric Company (NYSE:GE) and Honeywell International Inc. (NYSE:HON), two staples in the diversified products industry, have much more diversified revenue streams compared to Caterpillar and Deere, which make them inherently less volatile.

Another great pick

I think that Siemens AG (ADR) (NYSE:SI) is another great diversified products pick, being a global leader in all of its top segments, including industrial automation, power generation, medical equipment and transportation. One key benefit to Siemens is its geographical breadth, which gives the company vast exposure to the developing markets. That should be a key growth driver going forward as these emerging nations look to build up infrastructure. Siemens is one of the great dividend stocks that are based outside of the U.S., Vodafone Group Plc (ADR) (NASDAQ:VOD) and Unilever N.V. (ADR) (NYSE:UN) are just a couple others.

The infrastructure and cities segment (22% of 2012 revenues) will play a key role in this infrastructure buildup. This segment offers various sustainable solutions ranging from transportation, logistics, building and smart grid technologies. Its largest segment, energy, (35% of 2012 revenues) is exposed the ever chaining and developing energy industry, where the company provides power generation and renewable energy solutions. The next largest segment is Industry (26% of 2012 revenues) and includes various industry and building solutions.

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