Other investors say General Electric is a buy, as its shares trade under US$30 for the first time in 3 1/2 years.
Rees Peterson, an analyst at Wells Fargo Private Client Services, is recommending the stock to money managers at the San Francisco-based firm that oversees client assets of US$40 billion.
He says concerns that earnings will slow are overblown. Wells Fargo Bank NA already owned 73 million GE shares at the end of the first quarter, according to regulatory filings.
GE's medical unit will grow by 20 percent a year the next few years, Peterson says, picking up the slack from the declining sales from its power unit. Television and plastics revenue will also rise, he said.
Peterson said GE shares should be about 15 percent higher based on valuations investors have assigned to some of the companies' competitors, including Citigroup and United Technologies Corp.
A basket of eight of GE's peers trades at 21 times 2002 profit estimates, according to Peterson. GE sells at 18 times Peterson's estimate, implying a US$35.41 a share target price.
"In the high US$20s, GE is an exceptional value and I am pounding the table on GE under US$30," he said.
Hoes of American Express enlists the help of nine analysts at the Minneapolis-based firm to perform that task. Hoes, a basic materials analyst, concludes that GE is inexpensive based on conversations with the firm's media, aerospace and finance analysts.
He checks demand for appliances by looking at Whirlpool Inc's sales and uses Boeing Co's results to predict demand for plane engines.
Even investors who doubt that GE can achieve its profit targets say they are compelled to own it. The stock accounts for 3.19 percent of the Standard & Poor's 500 Index, the benchmark index for large-cap companies, according to Bloomberg data.
Microsoft now accounts for 3.23 percent of the index.
Allen Ashcroft, who manages the US$400 million ARK Blue Chip Equity Portfolio, said he holds fewer GE shares than its market value warrants. He's concerned that slack demand for aircraft engines and turbines will hamper its overall growth.
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