Caterpillar (CAT) Heavy Equipment Time

O.K. my stock pick of the day has been more like stock pick of the week, but hey if I picked stocks  I only liked for the day, the opportunity would usually be past before I ever got the post up.  Today’s stock choice is Caterpillar.  Here’s my long term view of the stock:

While I normally choose stocks that have well fallen below their average CAGR, Caterpillar at 7.9% has been very steady for 40 years with only one period in the 1980’s where it low it’s -2RMS.  In the late 70’s and early 80’s interest rates were sky high and no one was loaning for serious construction or capital improvements, this would have a serious impact on Catterpillar and I don’t see the same conditions today.  The speculative portion of the play, which I’m going to keep listening to President Elect Obama’s comments, is that he’s going to kick off a New New Deal (Newest Deal?) and I see a lot of government sponsored construction projects using a lot of heavy equipment .  Maybe a nuclear plant or two, new highways, some federal sponsered alternative energy farms, who knows exactly what, but this government will want to spend jobs and keep unemployment low.  I see this combination being very good Catepillar.

The dividend at 1.6% is a little low for my taste for such a mature company, but at only a 25% payout ratio, at least it is safe.  The 5 year PEG is at 0.51, I personally like PEGs under 1.0 so even if earnings are cut in half (not completely out of the question these days) the stock is still fairly priced.

Looking at the charts, we’re starting to flatten out with the 50 day Simple Moving Average which is currently priced at about $45, however there is a lot of overhead room if it can get crossed with any momentum.  The RSI is sitting neutral and the MACD has been negative for months so I don’t see it happening yet, but I’m going to keep an eye on it.

This week my plan is to keep finding ways to tighten my belt and throw more money at the market, both because I think there are great deal with no real sign of when the market will turn so I’ll just keep dollar cost averaging while it’s low, and to do my civic duty of helping holding the market up.  (With my vast wealth of course)

Good luck this week.

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9 Responses to “Caterpillar (CAT) Heavy Equipment Time”

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  7. Although Caterpillar may be affected by the world wide crisis, I think that the first investments and helps form any government will go to the public works, infra-structure etc. so Caterpillar as the biggest manufacturer of heavy machinery sounds a good option for stocks.

  8. The construction field always has it ups and downs and is always changing but progress will never stop.Even in a questionable economy there is always room for growth and expansion. The will and strength of the people is what makes us all able to move forward and accomplish great feats together. and construction has always been the backbone of this country no matter the economic status.

  9. Caterpillar is one of the biggest manufacturers of heavy machinery sounds to be a good option for stocks. A nice interesting post!!! :-)