By Tim Seymour
Construction and mining equipment giant Caterpillar (CAT) was a very different beast at its analyst day in Vegas compared to in 2011.
Last year, Caterpillar was a cheerleader for the global mining boom and recovery, after being cautious in 2010 following an apocalyptic 2008-2009. Last year, the company was concerned about capacity and meeting demand.
This year is a different story. Caterpillar is more sanguine, but it is not saying the world is dead and definitely not calling for the end of China.
With moderate world growth, the company will focus on being more profitable, much like in 2009.
To do this, it has said it will cut R&D, investment, and M&A — which sounds a lot like BHP Billiton (BHP) on the outlook for its new mining project.
Caterpillar’s inventory has been a huge overhang to the stock. Cat dealers in South America and China are the major problem, as they are holding off on purchases, although this is turning in Brazil. Our guys on the ground say locals are priming for major infrastructure projects.
The company sees “better sales growth” in 2014 and 2015 due to “healing” U.S. & European construction and modest emerging market construction.
Ultimately, Caterpillar sees enough global improvement and sufficient economic expansion to support growth in the mining and energy industries.
What does all this mean? Simple. Buy China, buy miners, and buy Caterpillar on any major weakness here.
China
- Has major technical buy set ups.
- Golden week next week has historically been met with buying.
- The transfer of power in mid-October is going to grease the rails.
- There were record reverse repos last night to pump up the system.
- Buy China Mobile (CHL).
Other miners:
Teck Resources Limited (TCK): copper, metal, coal, gold, molly — and featuring a 2.6% dividend yield
Norlisk Nickel (NILSY.PK) in Russia
