Caterpillar (CAT)

They primarily benefit from building data centres, from the AI play.

Took profits, because it got a bit expensive based on historical averages and peer valuations. Trading at 28x forward PE with 11% growth. If it pulled back enough, he'd look at it again.

What's interesting about this name is that it's performing well partly because of data centre expansion. You need equipment to build data centres to support the AI boom.

Is up 59% this year, due to much of their equipment used to build data centres. They hold an analyst meeting on Tuesday. Seems more growth ahead.

If you think there's going to be a mining cycle, it's a given that this name will sell a lot of equipment. 

People are underestimating its big turbine business -- natural gas turbine generators that are smaller than utility-grade generators. This part of the business feeds right into the data centre buildout. Can be used for alternate, backup sources of power. Only 5% of revenue right now, but could grow 10-25% a year over next few years with strong pricing. Yield is 1.12%.

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.

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

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

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.

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

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.

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

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).

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.

Wait until the CEO speaks at the next quarter, given the very uncertain macro environment.