This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Caterpillar Investors Waiting for 'Buy' Signal

BOSTON ( TheStreet) -- Caterpillar (CAT - Get Report) has generated massive sales of construction equipment across the world, acquisitions are boosting earnings and profit margins are at their peak. The company's stock has surged 64% in the past year.

And yet Oliver Pursche, manager of the GMG Defensive Beta Fund (MPDAX), which counts Caterpillar as one of its largest holdings, isn't increasing his position in the industrial giant, which will release first-quarter earnings results Friday. At least, not yet.

For a stock that has jumped 20% already this year, his view shouldn't be all that surprising to Caterpillar bulls.

"The stock has done phenomenally well over the last couple of years," Pursche said Wednesday from his office in Suffern, N.Y. "But we would rate this stock as a 'hold' based on valuation. We are still bullish on it. But as a result of that strong price appreciation, we would look for very strong, bullish forward-looking statements from Caterpillar in order for us to determine that we want to add to the position."

Caterpillar is expected to report first-quarter earnings of $1.31 a share on revenue of about $11.7 billion before the opening bell Friday. That compares to 36 cents a share and sales of $8.3 billion a year earlier.

Pursche maintains a focus on large-cap multinationals, which are growing businesses aggressively in emerging markets and demonstrate strong free cash flow. Caterpillar fits these requirements perfectly, making it the second-largest equity position in the GMG Defensive Beta Fund, according to Morningstar. Pursche has about $500 million in assets under management at his firm and about $20 million in the fund.

"We strongly believe in global infrastructure expansion and rebuilding, and Caterpillar is in a terrific space for that," Pursche says. "We think there will be continued wealth growth in emerging market nations, which is going to drive further demand in housing and road infrastructure. Specific to Caterpillar, they've done a very good job at managing their business, cutting some of their operating costs."

Pursche says he doubts anything the company says in its earnings release or subsequent conference call will persuade him to dump shares. Instead, he's looking to CEO Douglas Oberhelman to speak about Caterpillar's move into emerging markets.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
CAT $80.05 0.21%
CMI $137.46 0.50%
DE $87.46 -0.62%
ITW $96.74 0.22%
AAPL $124.10 -0.11%

Markets

DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs