Caterpillar Inc. (CAT): Will Bulls Win Over Bears?


As Caterpillar Inc. (NYSE:CAT) rolls out another 17% hike in its dividend to their shareholders, there are two sets of arguments that emerge about the future of the company. A CNBC report takes the insight from both Josh Brown and Jon Najarian, who are bullish and bearish about the company.

Caterpillar Inc.

While making his case of being bullish on the company, Josh Brown stated:

“Caterpillar is a great proxy for global growth. All of the economic data that matters from China and the United States particularly, is starting to come up roses. That’s why you’re seeing Caterpillar rally.”

Josh Brown further added that the major meltdown expected in China has not happened. Moreover, one of Caterpillar Inc. (NYSE:CAT)’s key competitors in the mining division, Joy Global, has smashed their earnings.

Talking about the technicals, Josh Brown said that Caterpillar Inc. (NYSE:CAT) has a Beta 1.0 and RoE of 20%, when most of its competitors have those levels at 11-12%. That’s appears attractive to Josh Brown, who firmly believes that the company could soon reach a ‘double top’.

Countering Josh Brown’s opinion comes from Najarian, who keeps concern about the lingering bottoming out of the mining segment, in which Caterpillar has a substantial exposure. At the same time, Najarian does not hold the company’s President call to reduce emissions by 30% from coal fire plants as appropriate for the company. However, he does approve of the fact that the construction space, in which the company has exposure, has seen phenomenal growth, but sees any room left for further growth. On the technical side, Najarian’s earlier bull view from $80 is over for the company, which is further strengthened with the fall in retail sales. That makes him to conclude that the company has lost 13% year over year, and it’s a good time to make an exit from the stock.

Winning Argument

In response, Josh Brown mentioned that the mining sector has bottomed out and could be referred from the stock prices of the Valley and BHP. On top of this, Brown is quite positive about the construction space, where Caterpillar has 40% share in North America, while the other portion getting a lift now.

Conclusively, CNBC experts feel that the presence of construction in the company’s portfolio really makes it a hot stock. However, in case of any weakness, the stock could go back to $100 a share, but that is the level it should be bought at.

Michael Larson-managed Bill & Melinda Gates Foundation Trust, has 5.65% of its equity portfolio invested in Caterpillar Inc. (NYSE:CAT), amassing 11.26 million shares. Adage Capital Management, led by Phill Gross And Robert Atchinson is another hedge fund, which holds 1.20 million shares of Caterpillar.

Disclosure: none

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