Caterpillar 's (
) stock hasn't made progress in the past two years.
In 2011, the stock price lost 3%. Last year, it eased 1%.
Is a comeback in the cards?
With a lackluster Relative Strength Rating of 44, some might
wonder why anybody would even ask the question.
Two reasons: First, the Machinery-Construction Mining industry
group leapt from No. 151 six weeks ago to No. 6 as of Thursday's
IBD. That torrid rise alone should snare the investor's
attention. And Caterpillar is probably the strongest stock in the
The second reason to pay some attention to Caterpillar is the
Return on equity was almost 43% in 2011, the best in four
years. Pretax margin was 11.5%, the best in five years.
Earnings increased 29%, 48% and 49% in the past three
quarters. Revenue, though, decelerated, falling from 23% growth
to 22% to 5%.
China and the world economy will figure big in the outcome for
Caterpillar. In Q3, North America accounted for 37% of total
revenue. The rest was international.
Admittedly, the picture for the world economy is blurry.
Depending on whom an investor listens to, the tone ranges from
glum to encouraging.
The disciplined investor doesn't have to guess right to win.
The idea is not to guess at all. Look to the stock and the market
Right now, Caterpillar has been
building a base
for almost 11 months. The stock is building the right side but is
still 18% off its high.
The Accumulation-Distribution Rating is B+. The up-down volume
ratio is a bullish 1.8, on a gauge where 1.0 is neutral. This
suggests funds are buying shares.
In the third quarter, Fidelity Contrafund opened a modest
position, buying 350,000 shares. Overall, though, fund
participation has declined. In the second half of 2012, the fund
count dropped from 1,710 to 1,623.
Wait for Cat to finish its base and break out, hopefully with
a much stronger RS rating.
The quarterly payout is 52 cents a share. The annualized yield
Caterpillar will report Q4 results before the open Jan.