Money Making Mergers
Two important stories you may have missed:
New Pipeline Giant Prepares For Energy Rebound
When a sector goes through a brutal correction, weaker companies go broke or get acquired, leaving the strongest ones in great shape for the next growth cycle. An even more compelling story is when strong ones merger—– and that’s what happened yesterday in the down-but-hardly-out energy industry.
The $28 billion deal between Enbridge (NYSE: ENB) and Spectra Energy (NYSE: SE) will create a crude oil and natural gas powerhouse. The former brings dominance in Canadian crude oil shipping, the latter has an impressive U.S. natural gas pipeline network. Igor Greenwald provides full analysis to subscribers in both Investing Daily’s MLP Profits and The Energy Strategist.
Both Enbridge and Spectra have performed well over the past year, and both rallied on the merger news. But many other energy stocks are still bargains. This latest example of consolidation is another sign that if you’re still avoiding the sector outright, you could miss out on major profits ahead. Igor and his colleague Robert Rapier have a slew of good energy buys recommended in those publications.
GE Still Bringing Good Things to Life?
In another deal that smacks of a rebound, General Electric (NYSE: GE) announced yesterday that it hopes to spend $1.4 billion to buy two European companies that make 3-D printing equipment – a fascinating tidbit that highlights this fast-growing technology’s future importance.
GE is an iconic company that remains the bluest of blue chips, but the stock has lost much of its luster. You might be surprised to learn that its share price is down more than 35% in the 21st century. Granted, it’s performed okay in recent years and provides a solid dividend yield, currently 3%. But will GE get its act together?
Magic 8-Ball says: Signs Point to Yes.
Part of GE’s problem was the finance business, which mired the company in the 2008 financial crisis. Part was pure size, which made achieving more than tiny annual revenue growth (as a percentage) tough. But GE also got away from its roots as an innovation company that continually created new and better products.
Recognizing that, GE has mostly shed its finance businesses and is refocusing on its industrial sweet spot – especially as a supplier of value-added equipment to other businesses (its consumer products business contributes only 7% of its revenue).
The company is in some long-term sweet spots. As a maker of exploration and production equipment to oil and natural gas drillers, GE will benefit from the energy rebound (see above). And it has a valuable stake in the long-term growth of healthcare spending as a major maker of medical equipment. It also can cash in on the coming boom in global infrastructure spending, as it is a top supplier of electrical and transportation equipment (such as power turbines, locomotives and airplane engines).
But if GE is to resume its winning ways of the 20th Century, it has to embrace innovative technologies – and this latest foray into 3-D printing represents an intriguing endorsement of that technology.