CAT: Rebuilding Hope
09/16/2005 12:00 am EST
"We all want the Gulf to rebuild so that everyone can return to prosperity," says Eric Roseman. "One company that, in a way, represents hope is Caterpillar, which has been helping to build the global economy for over eight decades." Here’s his review.
"The devastation and unimaginable displacement of tens of thousands of families across the American Gulf has left the world in disbelief. But America will rebuild. Previous calamities over the last few hundred years, including the great San Francisco earthquake early in the 20th century and the burning of Atlanta during the Civil War all saw massive infrastructure spending as a result of the utter devastation. If the United States can rebuild Iraq, it can certainly rebuild New Orleans, one of the country's most culturally diverse cities.
"A major investment theme that will surface is infrastructure spending and the incredible level of new equipment that will be required to clean up cities on the Gulf. Estimates now point to at least $100 billion dollars required to rebuild the Gulf cities, particularly New Orleans. And the best way to invest in this rebuilding is through Caterpillar (CAT NYSE), a global leader in manufacturing industrial equipment for the past 80 years. In 2004, Caterpillar's sales were $30.3 billion dollars.
"This blue-chip stock has been a solid investment over the last five years. CAT is trading close to its all-time high following a two-for-one stock-split in 2004. The company continues to earn mounds of free cash, has a strong balance sheet and is not only a play on Katrina's reconstruction efforts in the Gulf, but the emerging markets as well. The company has the largest share of the industrial equipment market in the US and has a booming business in China.
"Caterpillar, with its earth-moving equipment, fits perfectly in our Commodity Portfolio. The world needs to farm, needs to constantly build and improved current infrastructure projects, and CAT is a natural play on global economic growth and the industrial modernization of mankind. The stock should fetch at least $75 by year-end and easily over $100 a year from now as earnings explode higher. Buy up top $63.50."