Caterpillar Will Cruise Higher Still

Over the past couple of years, I have repeatedly written about machinery-sector analysts and their premature bearishness. I don't believe a single analyst has been strongly bullish on this group over the past year. Each analyst has his or her token buy-rated stocks, but for the most part, the sector has soared without real Wall Street sponsorship.

Into the throes of such negativity, I throw out an interesting long idea: Caterpillar (CAT).

This stock is still down materially from its recent highs, and it trades for less than 10 times my estimate of next year's earnings. Find a machinery stock -- any machinery stock -- with those two characteristics. You can't.

And yet, Caterpillar is the king of heavy machinery, the best of breed, the CAT-egory killer. It is one of the best-positioned companies in the world to exploit the most attractive secular industrial story out there: global infrastructure. And the best is also the cheapest. How often do you find that?

Investors love sound-bite investment themes, such as the technology era, the clean-water play or aging-baby-boomer concepts.

However, I believe the global infrastructure growth story will have great legs for years to come. As billions of people in China, India, Africa and South America become integrated into the global economy, they require major improvements in infrastructure. Significant investments in roads, bridges, airports, schools, hospitals, factories, mills, mines and refineries are absolutely necessary to support their inclusion into the modern economy.