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Caterpillar Inc. Message Board

  • kycat2008 kycat2008 Dec 31, 2012 11:47 AM Flag

    Caterpillar Is One Of The Best Investment Opportunities On The Dow

    Pretty much sums up everything about the stock and where he thinks it will be headed.

    Short Term

    Over the next twelve months, the stock is likely to appreciate from $86.81 to $110.49 per share. This implies 27% upside from current levels. The technical analysis indicates a trend reversal. While the previously mentioned price forecast using fundamental analysis further supports the assessment.

    Investors should buy CAT at $86.81 and sell at $110.49 in order to pocket short-term gains of 27% in 2013.

    Long Term

    The company is a great investment for the long-term. I anticipate CAT to deliver upon the price and earnings forecast despite the risk factors (missing analyst expectations). CAT's primary upside catalyst is international expansion, the urbanization of the middle class, and earnings management. I anticipate the company to deliver upon my forecasted price target of $237.01 by 2018. This implies a return of 173% by 2018. When factoring back in the dividends (based on the table below) the company will generate a combined return of 193%. This rate of return is exceptional, but comes with high-risk (5-year beta of 1.9).

    A higher yielding investment opportunity albeit having even higher risk is to buy the Jan 17, 2015 calls at the $85.00 strike. The call premiums trade at $14.70. The price forecast for the end of 2014 is $128.71. The rate of return if the calls expire at $128.71 is 185%, the option will break-even when the stock trades at $99.70.

    CAT has a market capitalization of $56.8 billion; the added liquidity makes this an investment opportunity appropriate for larger institutions.


    Investors should remain optimistic on Caterpillar as it is likely to outperform the Dow component going into the second half of 2013.

    The conclusion remains simple: buy Caterpillar on long-term growth.

    Sentiment: Buy

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