) chart shows strong support in the 81.00-82.00 level (see chart
[caption id="attachment_57666" align="alignright" width="300"
caption="Caterpillar is stock for Emerging Market Growth"]
...and weakness from China well flagged and priced into the
stock. Last night on Fast Money I debate CAT from the bull
case and argue that this company, who gets more than 60% of their
sales from emerging markets, is priced to own.
The company has been clear to investors saying that CAT is in a
"transitional" demand year. This is no surprise. Lower mining
sales have been priced into stock and factored into revised
guidance by CAT themselves leaving the stock at very interesting
While global commodity demand is weak and mining project are
being cut back its difficult to see the table being pounded. Fair
enough. Demand is recoiling but we are not expecting a return
to 2010 or 2006 conditions for that matter.
But growth isn't dead and the company is seeing emerging markets
pockets of strength. While, Latin America and China have slowed,
CAT is going to grow 10% in Africa according to their largest
African distributer, Barloworld.
JP Morgan just reported a 3rd strong month of sales in May,
which means a better than expected selling season continues in
- Management has proven the elephant can dance -
meaning they can cut costs and do what they need to whether slower
demand. Doug Oberhelman is one of the best in the business
and this was a 2009 accomplishment that shows they will be efficent
with their spending and CAPEX. Stock levels: If CAT was
banging up against $100 you don't rush in, but at $83 stock is at
interesting level just above what I think is great support and your
stop around $80
- Pre-crisis, when the company was much less
profitable it traded at a 14-14x multiple. The stock is
now at a 12x current earnings and 10x next year's earnings while
trading a P/B of 2.7x well below the 5.5x levels of 2006.
- Today they raised div to record .60/QTR to give investors
close to a 3% dividend yield to add to the rebounding earnings