Another Too-Late Call

No green shoots? No crocuses? No garden? That's certainly the conclusion of the UBS machinery analyst, Henry Kirn, in what I think is a well-reasoned piece of research about the group this morning.

Kirn's focused on risk/reward, which I always like. The stocks he downgraded from "Hold" to "Sell" -- Caterpillar (CAT - commentary - Trade Now), Parker-Hannifin (PH - commentary - Trade Now) and Eaton (ETN - commentary - Trade Now) -- are all up a great deal from their bottoms. But one thing that troubled me is that these stocks have gone up without Kirn. He had been using $30 as a price target for CAT despite the run-up and kept that target. Same thing with PH and ETN, where he had been using $39 and $42 as target prices for these two, respectively.

The call's having an impact, no doubt. You can see that. But his reasoning besides price is a tad specious, I believe: "continued weakness in key end markets given a customer base that is feeling the impact of the credit crunch, limited pricing power from recent industry capacity expansions and increased availability of used equipment." With the exception of the used market, the other issues may actually be in the rearview mirror.

Again, the real issue here, the one that is trenchant, is that investors have bid these up on hope to levels that do not jibe with historic parameters. However, I have always contended that you should be willing to pay maximum PEs on tough multiples, so I am a believer in the stocks around these levels.

My main hope with this research? That CAT hits his price target so I can buy more of it forAction Alerts PLUS.

Random musings: I continue to think that if we get any break in Apple (AAPL - commentary - Trade Now), it should be bought. Procter & Gamble (PG - commentary - Trade Now) smells like a buy at $50. Kimberly-Clark (KMB - commentary - Trade Now) down correctly on the Procter shortfall, but I like that company's accidentally high yield. ... Speaking of accidentally high-yielders, I would take a look at Boeing (BA - commentary - Trade Now), which just got another Dreamliner order. ... How about how no one likes Heinz (HNZ - commentary - Trade Now), despite the boosted dividend? Monro (MNRO - commentary - Trade Now) down $1.43 seems excessive to me. ... If you ask me what's ailing the market, it's gold's rally coupled with oil going toward the Saudi mid-$70s price target. Both ughs in my book.

At the time of publication, Cramer was long Caterpillar.

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