From Barron's:
Investors should invest in the companies that supply components to the heavy machinery maker.
CATERPILLAR'S (CAT) STOCK price performance, in the past year, resembles the earth-moving machinery that the company sells -- massive and powerful.
The company beat analyst estimates for the first quarter, earning 50 cents per share versus expectations of 39 cents, and it raised its 2010 guidance. Comments from top executives painted a bullish picture of the global economy.
"Industry activity and orders are significantly higher than last year and are at record levels in some areas," said Chairman and Chief Executive Officer Jim Owens.
Strong results sent shares 5% higher, to $71.95, in midday trading on Monday. The stock, which reached a 52-week high of $72.83 during the session, has more than doubled in the past year.
Though the results were admirable, if you're looking for a way to play growth in construction and mining, there are smaller and more nimble companies for the job (more on that below)....
...It would make more sense to buy components companies like Timken (TKR), electrical component maker Eaton (ETN) and Parker-Hannifin (PH), Lustgarten says.
"They're all supplying components to Caterpillar and other companies," he says. "They're as cheap or cheaper than Caterpillar. The valuations are much more attractive."
Caterpillar also stressed the strength of their mining business, which could bode well for other companies that profit off of mining, like equipment maker Bucyrus International (BUCY), says Michael Jaffe, a Standard & Poor's equity analyst who rates Caterpillar's shares at Buy. One of Jaffe's colleagues rates Bucyrus at Strong Buy.
Bucyrus is trading at a more reasonable multiple of 14 times 2011 earnings.
"If Caterpillar is enthused about mining markets, certainly a company like Bucyrus which has more of a focus on mining should get a lift too," Jaffe says....MORE
On the other hand I first thought this MSNBC story was about CAT analysts (Mr. Jaffe excluded, of course):
