On the other side, I see some tailwinds from its joint venture with Ariel Corporation. The company entered into a joint venture last December to provide pressure pumping solutions to oil and gas drillers. The venture has already acquired ProSource, which specializes in reciprocating pressure pumps. This will augment both Caterpillar’s and Ariel’s existing portfolio and should help provide their customers with better solutions.
Apart from the joint venture, I also see some upside from Caterpillar Inc. (NYSE:CAT)’s LNG locomotive initiative in the long run. Three of the country’s biggest rail-carriers have entered into an agreement with the company to manufacture train locomotives, that use gas as an alternative to traditional fuels.
Natural gas has a lot of potential for reducing the overall cost of the rail-carriers. An added advantage of such trains will be realized at the time of the implementation of tougher emission regulations in 2015. If successfully materialized, it will be the biggest shift in fuel consumption of the industry since the time when it started to use diesel instead of steam.
The investing opportunity
The acquisitions by these conglomerates seem strong, and should help steer the future of these companies. Eaton Corporation, PLC (NYSE:ETN)’s acquisition of Cooper Industries, and 3M Co. (NYSE:MMM)’s acquisition of Ceradyne should help boost sales and profitability of these companies. Apart from this, the strong capital allocation by 3M strengthens my faith in it.
As for Caterpillar Inc. (NYSE:CAT), the company has seen some tough times of late, and volatility is expected to continue in the near future as well. But its joint venture, and the LNG initiative, assures me of its decent future. I remain bullish about this conglomerate, too, despite the near-term volatility.
The article Conglomerate Stocks That Will Drive Your Returns in 2013 originally appeared on Fool.com and is written by Madhu Dube.
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