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The next cyclical set to make a CAT-like bounce


Caterpillar (CAT) rose more than 6% at the open of trading Monday after the construction and mining equipment giant beat earnings expectations and said it planned to repurchase $1.7 billion worth of its own shares in the first quarter of 2014.

The share lift came despite a 10% drop in revenue from the Q4 2012 and a 32% drop in annual profits. This divergence between fundamentals and stock price is sometimes considered a signal that it’s time to buy shares of cyclical companies.

In the attached clip Scott Nations of NationsShares says shares of agriculture construction and forestry company John Deere (DE) could be the ready to make a CAT-like leap higher.

By Nations’ way of the thinking, the company synonymous with large green tractors will see an uptick in business when grain prices inevitably recover later this year. Other factors in Deere’s favor relative to the rest of the market are a low PE multiple and relative weak performance over the last year.

Nations concedes that Deere investors may already be anticipating weak grain prices, but the company could be susceptible to the international problems hammering the rest of the market. “If there’s something we don’t know about it's [Deere’s] construction business and the emerging markets which would include China. If there’s a giant problem there then there’s going to be a little problem for Deere.”

Barring a total collapse abroad Nations sees blue skies, amber waves of grain and nothing but higher prices for Deere investors in 2014. Let us know what you think in the comment section below or via Twitter @yahoofinance or @jeffmacke