Diversified media, manufacturing and financial services company General Electric set a new 52-week high after a JP Morgan analyst put the conglomerate on his list of recommended stocks.
GE shares are about 8% higher than the beginning of the year, most of it since GE issued an upbeat outlook Dec. 12. GE is the parent company of CNBC.
Analyst Abhijit Chakrabortti in a client note said he removed Northrop Grumman from JP Morgan's recommended portfolio and replaced it with GE.
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He said shares should benefit from a recently lifted dividend, potential for divestiture, and increased business focus and expected 2007 growth against a broader market slowdown.
"This move is consistent with our inclination to increase the average stock size in our portfolio, but more importantly represents an acknowledgment that in the near term, an environment of moderating growth and earnings risk might favor even select mega-caps, a segment of the market we have specifically disliked for several years," wrote Chakrabortti.
In the past, the analyst said he disliked companies with huge market capitalizations like GE because of slow growth and over-diversification. GE has a market cap of about $395 billion.
But in 2007, Chakrabortti expects large-caps to gain momentum over small-caps, especially large companies with low amounts of cyclical or structural headwinds, like GE.
Prudential Equity Research analyst Nicholas P. Heymann in a separate client note reaffirmed an "Overweight" rating and $43 target price on shares, and said GE's transportation segment is set to enjoy increasing global rail transportation demand. Overseas expansion of the unit's production has pushed up margins by reducing costs, he added.