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You know the guy that follows up a lecture’s question and answer session by politely and verbosely introducing himself and thanking the speaker before asking the dumbest and most self-evident question that you could ever think of? He made it to the Talk on Ethics that I attended at Purdue University. I always wanted to see a speaker turn down a question because it was so stupid that it didn’t deserve to be acknowledged.

Unfortunately for me, James W. Owens, the CEO of Caterpillar (CAT),  was the featured speaker and he went right on ahead and destroyed the question with the greatest finesse. I was just glad that for a 1-hour seminar that was designed to talk about business ethics --- the ethics were prefaced with 30 minutes of industry and company numbers and drivers before President Owens began talking ethics.

A few important points: The period from 2004-2006 was the fastest global GDP growth since World War II. Compared to the dollar, two key currencies are not currently struggling: the Yen and the Yuan. Aluminum, copper and tin were three commodities that increased in price over the year until August and then fell off a cliff. Nickel and lead were two that just dive-bombed from the start.

Established in 1925 and in the spirit of the avoidance of nepotism, Caterpillar has survived the Great Depression. “We like to think we are a company based on merit." Looks like it’s working so far. In fact, it’s grown to be “twice as large as [its] nearest competitor.”

What’s the forecast? President Owens admits he’s on the highly optimistic end of the spectrum, but he sees sales about flat through 2009. According to him, the security analysts rebuke these ideas by wondering, “what we’re smoking.”

A couple John Madden type quotes that I jotted down through the ethics talk. “If you nip small things in the bud, they don’t become big things.” “We spend a lot of time treating confidential information confidentially.”

I see a company that’s been predictably been growing revenues at 16% and earnings at 24% over the past 5 years. They make their product where they plan to sell it. This is their natural hedge against currency rate swing. According to Graham analysis, it’s priced to grow at 0.5%. As the CEO said, he expects sales to be flat over the next year. Brutal, but still not bad considering the market conditions. I personally don’t have the time horizon to purchase this stock. A company where the optimistic projection is flat sales does not meet my required growth rates to entertain my fancy.

Once the credit markets work out and people decide to start building again, the stock price will already reflect it. Cramer predicted something absurd, like that housing will bottom in 274 days. Well, the stock market is a leading indicator, and 6 months is a good time frame. Check this stock again in 3 months.

Disclosure: I don’t own CAT

Source: Caterpillar: James Owens at Purdue University