Zach Tripp's  Instablog

Ticker: CAT

Here is the SA Market Current: http://seekingalpha.com/currents/post/554011

"We've seen a slowing in economic growth more than we expected," Caterpillar CEO Doug Oberhelman told analysts and reporters in Las Vegas. "We expect fairly anemic and modest growth through 2015."

Oberhelman reduced the earnings forecast for 2015 to $12 to $18 per share, from $15 to $20 per share previously.

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For a conservative long-term investor, assuming EPS of $9.59/share for FY12 (assumes $0.01 reduction from current Q3 and Q4 EPS) and a EPS of $12/share for FY15, a PEG of 1.0 results in $93/share.

If you have CAT in a DRiP account or are adding to your position in CAT on a regular basis, only add to position below $93/share (buying for dividend). This should help ensure you maintain your capital.

If a price appreciation is needed, say 8% CAGR minimum, and $93/share is reached by the end of FY14 (reflecting FY15 EPS). Add to your position under $79.75/share, which is very close to the recent lows (green line in the chart).

$79.75 would have a yield of 2.60%.

(click to enlarge)

11-Oct-2012: RBC downgrades CAT and sets price target to $95/share, which is inline with my estimates, meaning, being conservative and having a price target of $93/share by FY14 still seems about right. Remember to buy when everyone else is selling. I will add to my position under $80/share.

Disclosure: I am long CAT.

I listened to this report on Bloomberg this afternoon and it got me thinking about income inequality. Here is a link to the broadcast: bloom.bg/M7Ycf6

Here is my hypothetical example:

Let's say you pick one county in the US and find the average income of the lowest 20% is $25,000 and the average income for the top 20% (in the same county) is $250,000, a difference of $225,000. You come back 10 years later, and the average salary for the lowest 20% is $67,852 and the average income for the top 20% is $619,557, a difference of $552,705. The difference has more than doubled in 10 years.

What should be done about this?

Expense ratio changes for 27 Vanguard ETFs®
From Vanguard, 20-Jan-2012

In December 2011, Vanguard filed annual prospectus updates for 27 ETFs that had changes in their stated expense ratios. Eight of the ETFs had expense ratios that increased, while the remaining 19 ETFs had a decrease. Ten sector, six bond, and three mega-cap ETFs experienced reductions. Increases occurred in eight of our Russell and S&P domestic equity ETFs.

In the cases where there were expense ratio reductions, they were primarily a result of the way we operate our funds. When funds and their corresponding ETF share class experience greater efficiencies (either through asset growth, operating cost reductions, or a combination of both) the savings are passed on to the fund owners in the form of lower expenses.

For those ETFs where expense ratios increased, it was due to "acquired fund fees and expenses" (AFFE) that result from ownership of business development companies (BDCs).

Although the SEC requires that BDC costs be included in a fund's expense ratio, these fees are not incurred by the fund. They have no impact on a fund's total return or on its tracking error relative to an index. The financial statements in each fund's annual or semiannual report provide an annualized calculation of the fund's actual expenses for the period, a more accurate tally of the operating costs incurred by shareholders. Several Vanguard ETFs own shares of BDCs because the BDCs are included in the ETFs' target indexes.

As always, Vanguard continues to work hard to create value for our clients by offering hiqh-quality investments with low costs. The chart below identifies the ETFs that were affected along with their prior and current expense ratios. All of the ETFs below have fiscal years ending in August. As prospectuses are updated for other funds, there may be additional expense ratio changes.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.