Caterpillar (CAT)

He bought it this week. CAT covers industrials from mining to energy and rails.They delivered one of the best quarterly earnings, then broke to new highs. This plays into the rotation theme in which he favours industrials, healthcare and energy in the second half of this year, though not tech.

Just reported a strong earnings beat and their quarter defied concerns of a global slowdown. Shares rallied to an all-time high. CAT makes machines to non-residential construction, mining, oil/gas and data centre construction--all sectors doing well. Also, Washington is creating tons of jobs in infrastructure. CAT's sell-off was unwarranted in the first place. The CEO is making CAT less cyclical, and he foresaw the weakness in China.

They diversified away from China. CAT will benefit from federal infrastructure spending that will boost their orders. Also, when investors feel that US-China relationships are improving, they buy CAT. He sold some shares today. Has rallied since last May. Is now seeing money from the Infrastructure Bill of late 2021. Trades at 13x PE 2023.

Rallied last Friday. The CEO has diversified the services offered, but shares have slumped. Wall Street views it as an old-fashioned cyclical stock, which is wrong. He expects a lot of orders for infrastructure projects by next year. Shares have bumped because of China's stimulus plans, but China represents only 5% of CAT's business.

Great company. Given the debt ceiling talks, CAT can go lower in the next 4-5 days.

Core holding. A play on where the next bull market's going to be, and that's going to be cyclicals. Growth rate is fine, as is valuation. He'd go for cheaper names with the same view, think FTT or WJX.

Great run over a couple of years. Problem is economic slowdown to a recession. Industrial spending and capex will slow, and this will affect CAT. Don't run out to buy. It's a later-cycle stock. Look at DE, similar valuation but agriculture probably has better growth.