Caterpillar Inc. (CAT): The Best In The Business Is On Sale

Page 1 of 2

Caterpillar Inc. (NYSE:CAT), the world’s largest producer of earthmoving equipment, has done very well over the past few years, doubling its annual revenues since the financial crisis. I was hesitant to recommend it as an investment until recently because I was afraid it was getting too expensive. Since the beginning of February, however, shares have fallen 13.4% and are over 21% below their 52-week high at a time when it seems like most of the market is reaching new highs daily. I believe that it is time to put Caterpillar Inc. (NYSE:CAT) back on the radar, as it is not going to be on sale like this forever.

Caterpillar (NYSE:CAT) Trying to Spark a Flatlining Dow

About Caterpillar

Caterpillar Inc. (NYSE:CAT)’s recognizable yellow machines are used all over the world, and it is a truly global company with the majority (63%) of its revenues coming from outside of North America. Caterpillar divides its business into five operating segments: Construction Industries, Resource Industries, Power Systems, Financial Products, and Other.

The Construction Industries segment sells machines such as loaders and excavators to the construction and mining industries. This is the segment with the most to gain from the economic recovery, in my opinion, as it will lead to increased spending on infrastructure and other construction projects.

Resource Industries produces machinery for the mining, forestry, paving, and tunneling industries. This is Caterpillar’s largest segment, accounting for 32% of revenues, and was greatly expanded by Caterpillar’s acquisition of Bucyrus in 2011.

Power Systems is Caterpillar Inc. (NYSE:CAT)’s second largest segment, and produces reciprocating engines, turbines, diesel-electric locomotives, and components for all of those applications. The engines produced by the segment are used in the machinery produced by the company’s other segments. Power Systems has undergone significant growth lately, and the company has opened new engine facilities in Brazil, China, and India.

Financial Products in Caterpillar’s in-house financing division, providing equipment financing to both dealers and customers. The segment also includes insurance products for customers and dealers to support purchasing and leasing new equipment. While this segment only contributes a small amount of the company’s revenue (4%), it indirectly contributes much more, as much of the company’s equipment sales would not be possible without the services the segment provides.

Growth

While increased infrastructure spending will benefit all heavy equipment and construction-related businesses, Caterpillar should have a particular advantage. Its size allows Caterpillar to benefit from economies of scale and run more efficiently in terms of materials sourcing and manufacturing processes. Caterpillar Inc. (NYSE:CAT)’s dealer network is also incredibly strong and has tremendous reach across the globe, with the majority of the company’s dealers located outside of the U.S.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!