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Today's big stories

General Electric announced it’ll be splitting into three separate companies
Buffett’s just revealed the four biggest stocks he’s invested in, and some of them might surprise you – Read Now
PayPal reported worse-than-expected results, as eBay ditches its one-time partner

Three’s A Crowd

What’s Going On Here?

General Electric announced on Tuesday that it’ll be splitting into three separate companies, as the jack-of-all-trades continues to take social distancing guidelines admirably seriously.

What Does This Mean?

General Electric (GE) – which was one of the world’s biggest companies by market value until the early 2000s – has been struggling to bounce back ever since the 2008 financial crisis. That’s not for lack of trying, mind you: it’s previously sold off both its pharmaceuticals manufacturing and aircraft leasing businesses in an effort to boost its bottom line. Those moves… didn’t work. Desperate times call for desperate measures, then: GE’s planning to split up into three entirely separate companies by early 2024 – one focused on aviation, one on healthcare, and one on energy.

Why Should I Care?

For markets: Less might be more.
GE is a conglomerate, meaning it operates several unrelated businesses. But bigger isn’t always better: investors reckon conglomerates would be more profitable if they did just one thing well, rather than splitting their attention across multiple projects. That means GE isn’t necessarily as valuable as the sum of its parts, which is partly why it’s underperformed the US stock market by an average of 11% every year since 2009. Finally, though, that underperformance could be coming to an end: investors initially sent shares soaring by 12%.

The bigger picture: Not all splits are so simple.
Japanese conglomerate Toshiba is reportedly thinking about splitting into three separate companies too: it’s been under pressure from activist investors – those who use their significant stake in the company to influence change – to separate its infrastructure, devices, and microchip businesses. Still, that parting of ways might be trickier than GE’s: many of Toshiba’s businesses are wrapped up in issues of national security, meaning the Japanese government is likely to cast a wary eye over whoever takes control of them.

You might also like: How to invest like one of the best activist investors out there.

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Analyst Take

Where Is Saint Buffett Investing His Money?

Carl Hazeley, Analyst

What’s Going On Here?

Chances are you’ve heard of Warren Buffett – the billionaire founder of investment conglomerate Berkshire Hathaway who can seemingly do no wrong.

So, like most investors, you’re probably curious about what his firm’s invested in and why.

Well, you’re in luck, because Berkshire Hathaway shared exactly that over the weekend – and it turns out 70% of its $311 billion stock market portfolio is invested in just four stocks.

And since Buffett’s favorites – cheap-looking value stocks – tend to be a good way to hedge against inflation, the firm’s top picks could give your portfolio a boost too.

So that’s today’s Insight: what stocks Buffett’s firm is betting biggest on, and whether you should follow suit.

Read or listen to the Insight here

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