Caterpillar 2012 Q1 Results

Caterpillar (CAT) had yet another record breaking quarter! That's right a record breaking quarter!  So what gives with the stock price?  I have yet to understand some of the price action of late, but the Peoria Powerhouse isn't one to shy away from.  I can tell you from the conference call that business is good. Real good!  The only thing that could have be taken as a negative is a slow down in China, but yet increased activity in the US should offset the current weakness. 

I know that China is always seen as a growth engine for business and that investors panic when they see the slightest bit of negative news coming out of China.  However, in Caterpillar's case there is no need to fret.  China is a very small portion of CAT sales.  Only 3%  Yes maybe later down the road China will be a huge growth driver for CAT, but as of right now I wouldn't put to much thought into the slow down in China.  Management has already put plans in place to reduce the glut of inventory in China to shift/export to other markets that are on allocation.   The US market performed very well and the oil and gas business is on fire!  On top of that CAT raised its 2012 profit outlook. 

Q1 2012 vs Q1 2011

EPS was $2.37 vs. $1.84 a 28.80% increase

Sales were $15.981 billion vs. $12.949 billion Another 23.41% improvement

Profit was $1.586 billion vs. $1.225 billion

Other positives of note was an increased backlog of Caterpillar products bringing the total from $29.8 billion to $30.7 billion, global mining business is strong in China, operating margins were solid, backlog in mining equipment, and a 73% increase in the resource industry.  That means mining!  Mining is huge for CAT at the moment and I don't see any slowdown any time soon.

From the numbers and conservative outlook I still believe CAT will be trading north of $130 a share by the end of the year.   CAT is still a solid buy in my book.


P.S.  I also listened to Weatherford's (WFT) conference call over the weekend and they are still good to go. They started off to a slow start, but business should pick up during the second half of the year.

Have a great night!

Clay-


Full Disclosure

Current Holdings:
Cosi Inc. (COSI)-Monster Portfolio
Caterpillar (CAT)
Westport Innovations (WPRT) Monster Portfolio
Kinder Morgan Energy Partners (KMP)

I'm not a licensed financial advisor. All recommendations is strictly my personal opinion and the information is intended for learning purposes only. Invest at your own risk!

Stocks Trade In Negative Fashion/ What Really Makes Stocks Go Higher?

    Not much to say about today's trading.  The Market started in negative territory and showed some sign of hope during the middle of the day, but in the end the selling pressure continued as there wasn't anything to drive the market higher.  The job market is still an issue and Kohl's the retailer department store came out with disappointing earnings.  These are 2 negatives and with no real positive news to counter the bad there isn't really any reason for the stock market to go higher.  Why are jobs a big deal?  The reason is when jobs are created people spend more money to fuel the economy.  The economy won't prosper until the job market becomes positive. Kohl's on the other hand shows exactly what people are spending.  When consumers aren't spending money the retailers such as Kohl's profits are hindered by this.  Yes Kohl's put out earnings that were better than analysts expected, but didn't meet the future earnings that the analysts wanted to hear. Information gathered through http://finance.yahoo.com/

    Here is a little insight about the stock market.  The funny thing about stocks is that the Large Institutions and Fund Managers invest for the future. They are the ones with a large portion of the money invested in the stock market.  They don't care about what occurred or what has happened in the past.  They want to know what is the outlook for the future.  If the future is promising, that is where they are going to invest their money.  Once the outlook doesn't match with what the Large Institutions and Fund Managers are looking for they find other companies to invest in.  That is why you see stocks drop suddenly.  The Big Money is pulling out their investment and has found a better opportunity elsewhere. 

    The Large Institutions control the stock market.  This is a fact!  The key to investing is to find out where the Big Money is investing and buy those companies to take advantage of the Large Institutional buying that occurs.  The great thing about being a small investor is that you can get in and out of a stock much quicker than the Institutions.  Really if you could be right half the time and invest before the Big Money has a chance to be fully invested you will make money.  It can take some Large Institutions weeks to be fully invested in one particular company.  The reason behind that is in order for a Large Mutual Fund to perform and make people money they have to invest millions of dollars.  They can't just buy all at once because the demand would be so great it would drive the price of a stock through the roof! For Example:  A Fund Manager wants to invest $100 million in stock xyz.  In order for them not to show others what they are doing they must buy stock over a period of time.  So instead of investing $100 million all at once they may invest $5 million a day. That means it would take about 20 trading days or roughly a month to be fully invested.  That is how Institutions work!  In the end the small individual investor has the edge over the Large Institutions.  You just have to obtain the right information and you can beat them every time!

Thank You,

Clay-

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