“Davidson” submits (emphasis mine):
The “Caterpillar Upbeat on China Economy” $CAT below is one of 2doz stories I may see in any one day. Any one of these is normally tossed aside by investors/analysts as a one-off without much investment value and its meaning in the broad scheme of the investment environment is lost.
The Internet and tools such as Google Alerts lets one couple multiple stories, CEO interviews, earnings transcripts and actual financial and market performance together in a single collage that elevates stories such as these to the prominence they deserve in one’s investment thinking. Having carefully developed the process of grouping what are deemed routine “anecdotes” with information from multiple sources, this WSJ story clearly identifies the strong global economic trends that are in force today. Caterpillar is not seeing anything but continued demand from a global economic expansion.
In a climate of doom, gloom and the wide spread belief that we have fallen into a financial disaster this Caterpillar story becomes a beacon for value investors.
When stories such as these are compared to the hue and cry in the media that we have entered either a 2nd Recession or a 2nd Dip, it becomes clear that a form of negative mania has taken hold and swept the perceptions of many highly regarded analysts and advisors. It seems that very many have become disconnected from the markets’ “organic” or fundamental economic roots. Market history clearly shows that if the economic trend is upwards, then the market will eventually follow.
The market does not lead the economy! The market follows!!
Caterpillar is not alone. It used to be “What is good for General Motors is good for the country!” GM just reported 1st half 2011 earnings of ~$6Billion. This is far more than GM has ever earned in its entire history in a full 12mos. Auto sales are increasing and expected to hit the 13mil pace before this year is over and move to over a 14mill pace before the end of 2012 with 2013 yet higher. Honda and Toyota sales are still recovering from supply issues due to the tsunami of March 2011, but are expected to fill the currently unmet demand and achieve sales recovery in the 1Q2012.
If Caterpillar is upbeat and if General Motors is upbeat, then investors should question the basis of the negative bias that now exists.
When it comes time to take funds away from equity markets, I expect to be front and center. Today is not that time! Today is a period in which there great value available in the equity markets to investors by my estimate.
Here is the story:
WSJ Caterpillar Story:
SEPTEMBER 27, 2011
Caterpillar Upbeat on China Economy
PEORIA, Ill.—Caterpillar Inc. remains confident about prospects for China’s economy over the next few years despite a recent slowing as authorities there fight inflation, Richard Lavin, a group president of the world’s largest maker of construction and mining equipment, said in an interview.
Though demand for construction equipment in China has fallen in recent months, “we are optimistic about where our business is going in China over the next five years,” said Mr. Lavin, whose responsibilities include China, India and other high-growth markets.
Caterpillar found itself unable to keep up with demand for excavators in China in recent years. Now, even though the economy has slowed, the company is proceeding with a series of major investments to expand its capacity there in a variety of areas.
In Xuzhou, the company is in the midst of a major expansion of an excavator plant. When that project is completed in 2014, the company says, its capacity to build excavators there will be up 400% from the 2010 level. Caterpillar also is building plants elsewhere in China to make large engines for machinery and power generation; wheel loaders, and small excavators, weighing less than eight tons. The company is setting up a testing ground for machinery in Jiangsu province.
China accounts for more than half of global demand for construction equipment, Mr. Lavin said, and he expects the Chinese market to remain much larger than that of North America amid huge spending on mining and infrastructure projects in China.
Caterpillar already has about a dozen manufacturing plants and 8,500 employees in China. Partly to keep a closer watch on China, Mr. Lavin last year moved to Hong Kong from Peoria, where Caterpillar is based.
The company faces tough competition in China from a wide variety of foreign and domestic rivals. Caterpillar recently said its sales in China last year were $3.27 billion, or 7% of the global total.