Tuesday, January 12, 2010

What’s Up With Caterpillar’s Stock? (CAT)

The stock closed up $3.79 at $64.13, a new 52-week high. The stock contributed 28.65 points to yesterday's 45.80 point gain in the DJIA.
From MarketTalk:
Watching Caterpillar (CAT) shares go bananas today and wondering why, again.

We keep a pretty close eye on CAT, and it seems to us as if that stock is always front-and-center as the biggest dollar gainer on days when the Dow Industrials rally, and conversely tends to lead the pack lower when the selling gets aggressive.

And it’s not a new phenomenon — we recall watching CAT help drive the DJIA to all-time highs in 2007, with the story back then often linked to the over-hyped “decoupling” theory.

The thinking then was this: Even if things in North America slow down for CAT, its international business, particularly growth in emerging markets, will keep profits growing.

Of course, decoupling turned out to be a fallacy, and CAT’s stock got punished pretty hard in 2008. But the international story still seems to be the main attraction.

But even as the company’s management maintained a cautious tone — we remember CAT’s team being among one of the earliest to acknowledge that the US was in a recession, and the road out would be rough — the stock has continued to benefit from upside momentum....MORE

Our last post on CAT covered some of the same cautious ground: "Indicators: "Caterpillar Report Shows Demand Weak" (CAT)" -Dec. 18.

Near the close yesterday, MarketBeat reported on dealer sentiment:

Caterpillar Leads S&P

Heavy-equipment maker Caterpillar rose the most out of S&P 500 stocks Monday, after comments in an analyst note seemed to put a positive cast on future demand for the company’s machinery. The stock is up about 5.8%. Citing a survey of equipment dealers. Bank of American Merrill Lynch analysts wrote:

On average, dealers’ sentiment continued to improve in their outlook for the next six months, with 32% expecting growth greater than 2% (vs. 21% in the prior quarter) and 41% expecting flat growth (vs. 42% in 3Q09). On a relative basis, Latin America, Asia/Pacific and Africa/M.E. dealers offered a positive forecast over the next six months, while N.A. and European dealers continued to have the bleakest outlooks...MORE

Chart from MPTrader via Market Oracle: