Caterpillar Will Cruise Higher Still

Other investors have recognized this theme and priced sectors that benefit from it accordingly. A good example of that is the engineering and construction (E&C) group. Check out the stunning price-to-earnings ratio valuations for Fluor (FLR), Jacobs (JEC) or Shaw (SGR). They illustrate that investors clearly aren't completely ignorant about this concept.

But when it comes to machinery stocks generally, and Caterpillar specifically, investors and analysts just don't seem to get it. They worry about Caterpillar's residential exposure. They agonize over its heavy-duty truck business. Won't these exposures kill Caterpillar's story in the short term?

My advice to investors and analysts? Chill out. Look at the housing and truck stocks. Check out the homebuilders, up 50% since summer. Read every truck-related stock on the new-highs list. These stocks are rising right through the industry downturns. And nearly every analyst in both sectors missed the trade.

Caterpillar should be no different. But its roughly 15% exposure to domestic housing and trucks has the investment community on edge. What if Caterpillar misses the first quarter by a few pennies because of loader backhoes or heavy truck engines? Won't the stock plunge? Give me a break. In six months, the whole bear case will be history, just like it was with the other stocks that are hitting all-time highs without Wall Street sponsorship.

At a recent analyst meeting, Caterpillar revealed its long-term growth and profitability targets. The midpoint of those targets yields a $9 earnings-per-share level in a few years. If the company delivers that kind of growth and if the economy and stock market remain healthy, the stock would double from current prices. (It closed Tuesday at $64.42.)

Don't expect Wall Street analysts to promote this interesting long idea. Most of them have missed the bulk of the machinery-stock bull market. They won't dare to jump on board here.

But if you believe in the global infrastructure story, the poster-child company for that theme is downright cheap. And if the housing and trucking stocks have a clue, Caterpillar appears to have limited downside risk and a ton of upside.

BRIC (Brazil, Russia, India and China) is back. Energy is, too. Infrastructure never left. When investors finally get past the first quarter, the shares of this leading global infrastructure company may CAT-apult.

Caterpillar (CAT:NYSE) Here's a one-year chart

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