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Ray Merola  

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  • Is Caterpillar Stock Overvalued? [View article]

    Good points all, but CAT share price tends to be built upon the future, expectations. Late last year, many pundits were waiting for the price to fall to $80. Instead, it's rallied above $100 on the back of Construction Industries and E&T.

    Cyclical stocks are tough to own; euphoria and despair are both impostors in the space. Right now it appears that no one will ever buy any mining equipment....ever. Likely not the case.

    While the overall April figures don't look good, there's some data points beyond the headlines. It did appear that North American sales were up, including mining equipment. So were worldwide Construction Industries. So was the worldwide Energy and Transportation segment.

    In 2014 1Q, Resource Industries only contributed 7.8% of the total operating profit. The probability of it getting a whole lot worse seems pretty low. There's hardly anything there now.

    I continue to believe the stock hasn't much near-term upside; and easily could fall back some from here. However, 2 of 3 segments are holding their own; it only Resource Industries that's really in the tank.
    May 20, 2014. 11:00 AM | Likes Like |Link to Comment
  • Is Caterpillar Stock Overvalued? [View article]
    Agree, Abigsoxfan

    April rolling sales figures are out and they portend much of the same: declining sales in most regions, mining sales down, but North America continuing to improve. Stock's down on the news.

    The problem with the mining business is timing. Will this industry pick up? Yes. When will that happen? I have no way of figuring this out.

    Long CAT.
    May 20, 2014. 10:06 AM | Likes Like |Link to Comment
  • Is Caterpillar Stock Overvalued? [View article]

    First of all, thank you for taking the time to compose such a detailed analysis and opinion about Caterpillar. I trust readers will appreciate your view points.

    I agree that management has been at a loss to forecast equipment sales. This was evident upon the last conference call; the team was shell-shocked. I believe this was in large part why management said they would focus upon "what we can improve." The recent track record predicting machinery sales has been horrendous.

    The mining segment has been a big problem. My experience is that is can turn around quickly: and by the time the bell rings, it's typically too late to buy the stock. In addition, the mining business goes through a lot of spare parts and maintenance items. This will help stem the tide. (See the commentary by Abigsox fan below).
    May 20, 2014. 10:03 AM | Likes Like |Link to Comment
  • Is Caterpillar Stock Overvalued? [View article]

    Thank you. You have been a sound, consistent commentator about CAT stock and its underlying business. Indeed, the company has cut a wide swath; it's the biggest heavy machinery company in the world. As you point out, immense corporate span and scope may fog some pundits. Caterpillar has interests in mining equipment and China, but that lineup and region don't define the company.

    I also found it interesting to note that CAT is taking market share in many markets, but it's masked by a general downturn in some product lines or regions.
    May 20, 2014. 09:24 AM | Likes Like |Link to Comment
  • Vodafone: Valuation Premium Is Now Unwarranted [View article]
    Many thanks for the reply, Outsider. I plan to review the earnings release and supporting materials carefully.
    May 20, 2014. 08:31 AM | Likes Like |Link to Comment
  • Is Caterpillar Stock Overvalued? [View article]

    I suspect we will continue to see slow, but steady improvement in the North American economy. The EU may be awakening from its funk, too.
    May 20, 2014. 08:25 AM | Likes Like |Link to Comment
  • Is Caterpillar Stock Overvalued? [View article]
    Deere is an excellent company. I wish management could be a little more upbeat. They appear to have a "farmer's mentality;" sometimes it seems they can throw a wet towel on anything.

    Is the projected near-term operating earnings decline offset by the expected improvement in OCF?
    May 20, 2014. 08:24 AM | 1 Like Like |Link to Comment
  • Is Caterpillar Stock Overvalued? [View article]
    Thank you, Thomas.
    May 20, 2014. 08:19 AM | Likes Like |Link to Comment
  • Vodafone: Valuation Premium Is Now Unwarranted [View article]
    To the author:

    Can you provide any basis as to why you believe VOD is overvalued? I suggest that EPS may be not be the best metric by which to measure Telecoms, but even at that why is 10.75x 2015 EPS considered over-valued?

    How would you value VOD on P/CF or P/EBITDA?
    May 19, 2014. 01:44 PM | 4 Likes Like |Link to Comment
  • Not So Fast, GM Isn't Off The Hook Yet [View article]
    Well-stated and fair evaluation.

    All the bad news isn't out, nor are the fine over with. However, the total anticipated fines are unlikely to eclipse the lost market value since the incident hit the news wires. The company has lost over $10 billion in market cap.

    The drumbeat of negative news has overwhelmed other data points that may mitigate the damages. Here's an article I found that discusses the matter in more depth than some others:

    I have also been impressed with how GM CEO Mary Barra has attacked the situation: opening up to the Feds all materials from the internal investigation, initiating some management housecleaning, adding safety engineers, moving ahead on additional recalls, etc.

    Notably, Warren Buffett trimmed GM stock from Bershire Hathaway's holdings. However, my view is this was never a "forever" purchase. GM did not fit Buffett's underlying business model. However, it does represent a cyclical play on a reorganized General Motors brand. While the current 13-F shows a 10MM reduction in shares, the current level is static with GM common equity owned in early 2013.

    May 19, 2014. 09:41 AM | 3 Likes Like |Link to Comment
  • Thoughts On The Celgene Revlimid Markman Hearing [View article]
    Thank you, Daniel

    Excellent, comprehensive data and clear opinion. I read your entire article with great interest, though I must admit some of the reading is pretty tough sledding for an engineer/business man versus a patent attorney/biotech man.

    My understanding is that the judge will render an opinion in about 60 days, is that correct? And based upon your take on the proceedings, what probability do you place on any sort of settlement talks between Celgene and Natco/ACT in the meantime?
    May 16, 2014. 10:02 AM | 1 Like Like |Link to Comment
  • Vodafone: An Attractive European Dividend Growth Stock [View article]

    Congratulations on your first S.A. article. Very well written. You've identified a very good offshore income play. Perhaps the near-term ride will be bumpy as it appears AT&T will not make an offer for what remains of Vodafone. This will undoubtedly cause some traders to jump ship; the process appears to have begun already.

    However, Vodafone doesn't need AT&T to succeed. It has a good strategy in place. The company is headed by a fine CEO.

    The 5.0% yield is safe; I do not see it giving ground.
    May 15, 2014. 05:50 PM | 6 Likes Like |Link to Comment
  • Investing In America: Part 1 - U.S. Bancorp [View article]
    Note to Readers via news wire:

    US Bancorp (NYSE: USB) was LARGER YET AGAIN at 80.026 million versus about 79.3 million shares last time. This is a position that just keeps growing.

    I like seeing Warren Buffett as a fellow shareholder.
    May 15, 2014. 05:44 PM | 2 Likes Like |Link to Comment
  • Investing In America, Part 4 - Consolidated Edison [View article]
    The bountiful yield can be juiced now and then with a well-placed covered call. Likewise, I tend to accumulate shares via cash-secured puts. The low beta keeps the IV down, but I like to conservatively add a dash of "nickel and dime" income with stocks like ConEd.
    May 14, 2014. 02:41 PM | Likes Like |Link to Comment
  • Investing In America, Part 3 - Express Scripts [View article]
    You said it much more succinctly than I did, E Nuff. Thank you.
    May 14, 2014. 02:37 PM | Likes Like |Link to Comment