When To Buy Caterpillar

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Posted October 2, 2018

Caterpillar (CAT) has long been a staple investment for those looking to invest in the industrial sector. The company has been around since 1925 and currently is poised to generate over $54 billion in revenue this year. The company has been benefiting from the boom in construction worldwide. Recently we have seen the stock pullback due to the threat of tariffs having a meaningful impact on sales. We will know more in the coming quarters but for now we must review when is the best time to add an industrial stock like Caterpillar to the portfolio.

Revenue saw strong double digit growth with a slight miss, and net income grew a robust 112%. This kind of growth is more representative of a new up and coming tech stock then a 93 year old machinery builder. The company was helped by double digit growth in every segment, construction industries up 24%, resource industries up an amazing 38%, energy & transportation up 20% and machinery, energy & transportation up another 25%. This kind of growth comes from a well stimulated economy and doesn't usually disappear over night. The company continues to build its cash position growing it to a recent $8.65 billion. Debt on the other hand is around $36.1 billion. Some of this debt is due to financial services, in other words loans held on the balance sheet for customers who financed equipment.