Added to Enterprise Financial
Shares are up nearly 4% on the day, and I have added to my holdings.
As I have previously written, this well-run bank has no apparent successor to the CEO, and I look for a deal somewhere down the line.
Why I Wouldn't Chase Banks Now
In response to a number of emails, I would not chase bank stocks now, nor would I sell the stocks -- unless the time frame is quite short term. Let the sector back down on profit taking after the huge move.
It's a long game.
Must Read: Strange Investments Buffett, Soros and Other Billionaires Made Last Quarter
CAT Is a Dog ... Again
CAT routinely offers intermediate-term and multiyear earnings forecasts that are shockingly optimistic relative to what is produced and delivered.
Here are some past gems from CAT's CEO and from the company:
- Caterpillar CEO: Immigration key to economic growth
- Caterpillar CEO: Most Confident I've Been in 2 Years
- Caterpillar on the Rise After Bulldozing Earnings Expectations
These are but a sampling; there are so many more notoriously optimistic and unrealistic forecasts that have been offered up by Caterpillar over time that there are too many to note here.
Making matters worse has been Caterpillar's share buyback program, which fueled excitement back in late 2014 -- and fortunately provided us with an entry point to short the shares, as CAT beat consensus forecasts solely on its aggressive purchases at between $100 to $105 a share.
Here is what I wrote at the time:
Bad Buyback Rationale
- CAT's CEO doesn't convince.
To me, Caterpillar's CEO (on TV) just gave an extremely dumb reason why Caterpillar repurchased stock in the latest quarter.
Teledyne's Dr. Henry Singleton and Omega's Lee Cooperman have taught us that corprorations should buy back stock only when the following conditions are met:
- The share price is at a substantial discount to private market value. (CAT's CEO never mentioned this.)
- You have the balance sheet to absorb the buyback. (CAT doesnt.)
- You continue to build (read: cap expenditures) for the future. (CAT isn't.)
- You have confidence in the future (the company expressed concerns about the future in the release.)
Thursday morning, CAT reported a miss to sales and has cut its full-year revenue forecast (as I suggested Wednesday after the URI guide-down)
I will have more on CAT after the conference call and a complete release of the earnings.
The shares are down $3 in premarket trading to a new low of $77 a share.
Caterpillar is on my Best Ideas List -- put on as a short in late 2014 at $106 a share.