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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (21802)	7/30/2005 12:07:25 PM
From: - with a K	Respond to of 78704

Paul, it's interesting how differently investors see things sometimes! I look at CAT vs. TEX and I see lots of things that tell me CAT is a better managed company and a more attractive stock: better margins with a similar forward PE; significantly higher ROE and ROA; a dividend; a better return the last 3 years; and more. TEX got mentioned on Cramer's show Thursday and then Friday he did a profile piece on them as his pick of the week for Monday. Yahoo showed it up AH yesterday to $50. That said, I may not have been interested because of the cloud over their filing, as you correctly pointed out. But I would expect both (and others, of course) to benefit from the transportation bill, which may pass next week. Cramer's plug should push TEX higher but I am reluctant to chase it at this point. My thesis for getting into CAT was its growth and attractive valuation, strong management, rising estimates, strong quarterly results in April and bullish outlook, dividend (which subsequently was raised 22%), geographic and business diversity, pending transportation bill and CAFTA. On Thursday the House passed CAFTA, adding six Latin American countries to the list of nations with free-trade agreements with the United States. CAFTA would boost U.S. manufacturing exports by $1 billion a year, while preserving $4 billion worth of existing exports that could be jeopardized if Central American textile companies lost business to cheaper Asian rivals, the National Association of Manufacturers has estimated. Jim Owens, chief executive of construction and mining equipment maker Caterpillar Inc. (CAT), is one of the industry leaders urging lawmakers to approve CAFTA. "For Caterpillar, the benefits of free trade are very real," he wrote in a May letter to House of Representatives Speaker Dennis Hastert of Illinois. After a free trade pact with Chile went into effect last year, Caterpillar's U.S. exports to that country nearly doubled, Owens said. Caterpillar is hoping to benefit from the $10 billion in new infrastructure projects planned in the CAFTA countries. As with any trade issue, China is a factor in the equation. By gaining tariff-free access to another market, U.S. exporters hope to elbow out overseas rivals. While some tariffs would not be lifted for 10 years or more, exports of nearly all construction and agricultural equipment would receive duty-free treatment from the start. Now I read that CAT is trying to buy a controlling interest in China's number one machinery maker, Xugong Machinery. I think CAT is the long term play here but I gotta think TEX will get a boost next week from Cramer and the transportation bill. FWIW, here's my Graham fair value calculation for CAT and TEX, using the average expected earnings, after hours price for TEX, and forecasted growth estimates from Yahoo: Company: CAT Date: 7/29/05 Next year's expected earnings: $4.81 EPS growth rate used for estimate: 12 Multiple Graham used for estimate: 8.5 Graham Fair Value: $110.05 Current Price: $53.91 $ difference: $56.14 Percent Growth to Fair Value: 104.14% Company: TEX Date: 7/29/05 Next year's expected earnings: $5.17 EPS growth rate used for estimate: 8.5 Multiple Graham used for estimate: 8.5 Graham Fair Value: $92.81 Current Price: $50.00 $ difference: $42.81 Percent Growth to Fair Value: 85.62%

To: Paul Senior who wrote (21802)	7/30/2005 5:01:41 PM
From: bruwin	Respond to of 78704

TEX, in my opinion, doesn’t represent a Value stock. You’re quite right that it’s behind with its financial statements. Last Annual for 2003 loaded on 20/2/04, and last Quarterly for 9/2004 loaded on 3/11/2004. What one can see, from what’s available, is a stock with flat recent Quarterly Turnover compared to better Annual numbers. However, for me, its Operating Margin is far too low. It has far too much debt, which it doesn’t appear to be utilising very effectively. And as a result, that debt is costing it too much money. It’s last Annual Result showed a pre-tax net debt cost of $92.8 mil. with a corresponding Bottom Line LOSS of -$25.5 mil. With Greenspan likely to continue raising interest rates in the foreseeable future, things won’t get any better for TEX. Finally, it’s getting a negligible return from its Employment of Capital. Personally, I wouldn’t be spending any money on TEX’s stock.

To: Paul Senior who wrote (21802)	2/9/2007 3:21:26 PM
From: Paul Senior	Read Replies (1) \| Respond to of 78704

Yes, CAT debt seems high - in absolute terms (34Billion?) and in relative terms (compared to past years). OTOH the company seems to be doing good things (so far) with that debt. ROA is up, as are margins (so far). The stock already has moved up over the past few years. So I have to worry if it's not already too late to be a buyer. I'm confident that CAT will get a good share of the global construction/mining business. (I'm hoping that those cyclical businesses are not now seeing reduced demand.) In the 1970-1980's I - like many or most others - was not so confident about CAT's prospects. With the ascendency of Japan, Inc. it was widely believed/reported then that Komatsu would decimate CAT, just as Japanese manufacturing techniques were enabling Japanese auto makers to pound Detroit. That has not happened: CAT dominates still. ============= Always a puzzle to me how some stocks in a sector behave when the market and the stocks in a sector move up. Sometimes it's the market share leader that sees the max stock price gain, sometimes the most leveraged, sometimes the most downtrodden. I've been selling some TEX (an "inferior" company to CAT, imo) over $60. That's about a triple since mentioned here, and beats CAT's stock price rise. OTOH, I'm one who's totally missed the great rise in JLG, another in the sector (recently taken private). finance.yahoo.com ------- Fwiw, in the "construction" sector, I am also holding United Rentals, finance.yahoo.com