Japan’s Rebuilding Favors Caterpillar

Focus: STOCKS

Michael Brush Image Michael Brush Columnist, MSN Money

The maker of heavy machinery should profit handsomely from the colossal reconstruction effort, writes Michael Brush of MSN Money.

Rebuilding Japan after the Tohoku earthquake and tsunami will cost more than $300 billion, the Japanese government estimates.

Eventually, the companies applying their skills and providing much-needed equipment to rebuild Japan will make money. And investors in the companies that profit from all that work will be rewarded.

The estimated $309 billion price tag on the recovery effort is a big number, particularly in a still-slow economy. "If it trickles down, as we all know it is going to have to, I think this is going to be a major opportunity for a lot of our industrial companies here in the US," says Jeff Duncan, the CEO of Duncan Financial Management in St. Louis.

Japan will obviously need a lot of heavy-construction and earth-moving equipment. As the largest heavy-equipment manufacturer in the world, Caterpillar (CAT) seems like a natural to sell much of the gear for the job—but how much is hard to say.

Its chief rival in heavy equipment, Komatsu (KMTUY), is based in Japan. And so is another major player in the space, Hitachi (HIT). There's likely going to be a natural bias in Japan toward buying from domestic suppliers like these.

Still, "we think Caterpillar could see some opportunity at the expense of its Japanese peers," says Morningstar analyst Adam Fleck.