GE Has A China Problem
Former GE CEO Jeffrey Immelt used to tout China as the company’s next engine of growth. The percentage of GE’s revenue generated from Asia is in the mid single-digits. The challenge has been to compete in China without transferring key technology to the company’s Chinese venture partners. Asia was expected to grow at a faster clip than other regions. GE has made significant investments in China in the areas of Power, medical equipment and Aviation.
GE expects future growth in Healthcare (17% of total revenue) and Aviation (22% total revenue) to come from emerging markets and China. That means over 35% of GE’s core revenue could have out-sized dependence on China. In any trade war with China U.S. multinationals like GE are bound to be clipped; China could be a headwind going forward.
Conclusion
The secular shift from Power to offshore wind, capital adequacy issues and its exposure to China make GE a sell. Buffett is barking up the wrong tree.
