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That's because tech companies have traditionally enjoyed faster earnings growth than other types of businesses.
Its manager, G.Kenneth Heebner, 64, said he looked for "companies with bigger earnings or faster earnings growth rates than investors had expected".
A spinoff is thus not only an alluring and convenient way to clean up the parent's balance sheet, it is also a way for managers to show faster earnings improvement by easily discarding a low- or no-growth business.
"If the economy does not grow faster, earnings growth in the energy sector is obviously going to be limited," said Fadel Gheit, a senior oil analyst at Oppenheimer & Company.
Many of the … industrial firms Mr. Trump would like to see increase hiring in the United States are under intense pressure from Wall Street, especially activist investors and hedge funds, to generate faster earnings growth.
At that point, it would again become dependent on faster earnings growth.
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Intuitively, fast earnings growth predicts future Googles but not as many as analysts believe.
In addition, like many trust-me stocks, G.E. trades at a premium to the market and its competitors because of its fast earnings growth.
Indeed, in a year in which the global economy is expanding at a subpar rate of 2.6 percent, tech and industrials are enjoying some of the fastest earnings growth in the market.
"There are some real questions out there that need to be answered about how fast earnings growth will be and is the economy slipping back into recession," said John Caldwell, chief equity strategist at the McDonald Financial Group.
The fundamental economic issue here is that the stock prices of technology companies, with few exceptions, already reflect the market's often-outsized expectations of fast earnings growth in the future.
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