CAT

Caterpillar Prepares for Continued Pressure; Slashing Our Fair Value

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Caterpillar’s (CAT) shares have taken a substantial hit following the firm’s restructuring and cost reduction announcement September 24. The slowing economy in China, the largest market for construction machinery in the world, has infected the export-dependent countries of Brazil, Canada, and Australia, resulting in severe weakness in mining activity and construction sales, almost everywhere on the globe. OPEC’s dedication to putting US producers out of business has wreaked havoc on the price of oil and orders for oil-related applications. Cat Financial’s exposure to increasingly weaker credits in the mining and energy arenas, however, has us most concerned. We’ve materially lowered our fair value estimate as a result.  Caterpillar’s cost reduction plans will begin in late 2015 and are indicative of … Read more

Agricultural Equipment Industry Stuck in the Mud

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The agricultural equipment industry is dependent on a global economy that remains mired in mediocrity. Durable goods orders fell in both April and May 2015–as well as 9 of the 10 months prior–and the solid 3.4% increase in June is misleading due to the extraordinary number of aircraft orders. Excluding transportation orders, the increase for the month of June was a slight 0.8%. Economic conditions in the US, if construed as positive, in the words of Caterpillar (CAT), the global economy “remains relatively stagnant,” with ongoing weakness in China and Brazil and uncertainty across the Eurozone given the crisis in Greece. Weak commodity prices are not suggestive of a near-term recovery for the overall economy either. Crude oil prices are … Read more

There’s More Rough Sledding Ahead; Removing Half of Microsoft from DG Portfolio

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Reverberations of the collapse in commodity prices have influenced much more than the commodity producers themselves. The slide has impacted business in a variety of sectors, almost across the board, as suppliers and customers seemed to pause to assess the damage and opportunities. The strengthening dollar is also having an unprecedented impact on the growth of global entities. If the disappointments yesterday (see here) didn’t signal an inflection point in the markets, then today surely has. It was just yesterday that we reiterated our view that Peabody Energy’s (BTU) dividend was at risk, and almost on cue, the firm announced today that it would slash its payout more than 97%, to $0.085 per share on a quarterly basis. The Dividend … Read more

This Just Feels Different…Mr. Brown

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We think the correction is coming. Here are 7 reasons why we plan to reduce exposure to cyclicals and add some protection to the portfolios. By Brian Nelson, CFA I hope you don’t mind my using baseball analogies. Baseball and investing are perhaps the only two endeavors where if you get more than half right, you’re at the top of the list. In any case, you don’t have to be a big baseball fan to appreciate the similarities. I used an example with Ted Williams in this piece about fat pitch investing, but there’s another analogy that is worth sharing. I’ve been to the Louisville Slugger Museum and Factory Tour a few times in the past couple years. My little … Read more

The Dividend Dilemma

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One of the core tenets of the Valuentum process not only rests in the all-important price vs. value consideration (see Valuentum’s Brian Nelson talk about that here), but also in “letting winners run.” At first read, these two items appear to be at odds with each other. For example, we preach about getting stocks at a bargain, but yet, we don’t sell holdings when they start to move beyond our estimate of their fair value. What gives? At the Valuentum core, we prefer an entry point that corresponds to the time when shares have substantial valuation and pricing support (i.e. they have high Valuentum Buying Index ratings), and we prefer an exit point when shares have little valuation and pricing … Read more

Valuentum Economic Castleâ„¢ Rating Update

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Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

Dividend Increases for the Week Ending June 13

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Below we provide a list of firms that raised their dividends during the week ending June 13. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week Baytex Energy (BTE): now C$0.24 per share monthly dividend, was C$0.22. Best Buy (BBY): now $0.19 per share quarterly dividend, was $0.17. Caterpillar (CAT): now $0.70 per share quarterly dividend, was $0.60. Cherry Hill Mortgage Investment (CHMI): now $0.51 per share quarterly dividend, was $0.50. Essex Property Trust (ESS): now $1.30 per share quarterly dividend, was $1.21. FedEx (FDX): now $0.20 per share quarterly dividend, was … Read more

Thank you…

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By Brian Nelson, CFA Earlier this week, I received an email from a colleague and valued member of our services. I wanted to share it here for others to read. I haven’t included his name, but if he wants me to, I can add it in. It is filled with wisdom, experience and kindness. And it really made my year to read his words. The Valuentum community, I believe, is the best community of investors out there. Sir, if you do happen to read your own email on our site, we very much have appreciated your feedback, and we hope to continue to live up to your praises. We are dedicated, and our team has been rejuvenated by your words. … Read more

Caterpillar’s Fourth-Quarter Performance Is Better Than Feared; Free Cash Flow Significantly Improved

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Caterpillar released fourth-quarter results Monday, and while the performance was better-than-feared, it still wasn’t pretty. Revenue dropped 10% in the quarter, but management was able to edge out a $0.08 adjusted profit-per-share increase from the same period a year ago thanks to aggressive cost cutting. Still, it wasn’t much to write home about, especially given the sharp drop in sales of new and relatively high-margin machines for mining equipment, which punished full-year results. We think Caterpillar’s dealer network is a significant competitive advantage. The company’s reach is phenomenal, with about 50 dealers in the US and over 140 outside of the US (serving over 180 countries). But near-term trends do not at all look favorable for the firm. Industry surveys … Read more