David Fingold Caterpillar CAT-N WATCH Jun 18, 2018

Rough go recently. About 50% of production is domestic to the US. 35% of its business is recurring service revenue, encouraging. Questions around international business. If recession and tariffs are permanent, expect trouble. 

If those clouds dissipate, this could be a good entry point. US administration has changed, but infrastructure renewal needs remain strong. What you could do is buy this, but barbell it with more defensive areas such as telcos, utilities, consumer staples.

The former CEO was good, but no longer running the company. However, shares are not expensive now, -18% this year. That said, it's not the time to buy this (could fall further).

They report Wednesday. Benefits from Joe Biden's infrastructure bill and has plenty of projects to build ahead.

He bought more CAT. It's a stealthy play in the data centre space where CAT does the heavy construction. This trades at only 17x PE, a 25% discount to John Deere, historically wide. Pays a 2% dividend and has lots of free cash flow.

Owns it for the data centre build, which is seeing huge demand.

It reports Tuesday. He expects a good quarter as CAT rides the wave of infrastructure spending and re-shoring.

Upgraded today. Is fairly valued. The quarter was good, but not exciting. Is a core position of his. The risk is if Russia and Ukraine end the war, this could lower commodity prices, but he doesn't expect this anytime soon.

Have a strong backlog. Wants to see margins improvement. It's had a huge run, but can keep going to finish the year strongly.

Projected 18% earnings growth in 2026, yet trades at only 22x PE 2026.

Sold as too pricey when it got to 27x forward PE for 6-7% growth. Because it's so cyclical, it moves around and this will give him another chance to buy.