Cat Stock Blog represents a two-month experiment to test the prospects of a blog devoted to the stock of a single large corporation.
I chose Caterpillar Inc. because it’s based in my hometown and I have many visceral personal connections to the company and its fate. I reasoned that a blog about Caterpillar could attract a large audience among everybody who has a common interest in the company — employees, competitors, suppliers, customers — and that it’s stock represented a) the one thing in which all parties shared a common interest; and b) a score card of how the company was doing in the marketplace
As fate would have it, other more attractive opportunities made it impossible for me to devote the energy required to develop Cat Stock Blog to its full potential. But I think the idea would work well with any large corporation, particularly one based in Silicon Valley (A Cisco stock blog would be an instant hit, I suspect, with its universe of plugged-in techies who must be tired of Apple and HP getting all the attention).
Thanks to all who joined in the fun and remember: those of a true party spirit always find a way to keep the festivities alive when the host calls “lights out.”
I cruise these RSS feeds for news on Caterpillar Inc. Each of these links is to the actual feed rather the Web site. (Still not up on RSS? Get the details and get in on the fun; it allows scanning dozens or even hundreds of sites for news bits in minutes so you don’t have to load the whole web site in your browser to find the newest stuff there.)
- All Cat.com Newsfeeds: Mostly press releases hawking new equipment, but major announcements of earnings, financial filings and employment like layoffs also show up here.
- Google Blog Search: Searches on “caterpillar” so you get a few hits about fuzzy wormy critters.
- Google News Search. Since it’s news, the fuzzy-critter quotient is lower. Good place to find news about local employment-related reports.
- Yahoo! Finance Blogs: Searches on SeekingAlpha.com; doesn’t generate all that much traffic.
- Yahoo! Finance News. All the main news headlines will show up here, plus some links to investment-related sites.
- Twitter Search: Good place for links to news as it’s breaking.
- StockTwits: Twittering stock traders discuss Cat; light traffic now but could grow with Twitter’s popularity.
- Architectural Record. Architects are the first to learn about the fate of the construction industry.
- Construction Equipment. Good site for overall coverage of machinery.
- Construction.com. More of the same, though much is behind a paywall.
- Engineering News Record. Much like the architecture site, tracks early trends that will affect demand for machinery.
- Pit and Quarry Editor’s Blog. News updates from a quarryman’s perspective. Lots of news on rock.
- Construction Pundit. Lots of unexpected construction-related news bits here.
- Market Watch. Passable at best, but it might have occasional unexpectedly good links.
- Motley Fool. If you can stomach the constant pitches for Foolish merchandise, you can find many good stock-related tips here.
- YouTube Videos. Occasionally cool tractor videos show up here.
Visions of infrastructure spending keep dancing on the horizon for Caterpillar investors, who saw Friday’s close lop 7 percent off last Friday’s 33.28 finish. Full quote at Yahoo Finance.
The indexes finished a notch lower: Dow, down 1.04%; Nasdaq, down 0.48%; S&P 500, down 8.35. Wrap-up at Market Watch.
Cat’s volume of 10 million shares is about a third below average; maybe the bear’s found better-tasting berries to much on. While Cat outperformed the indexes, it also closed within a dime of its low for the day. Given the thrashing Terex took yesterday, I wouldn’t look to Deere for good cheer next week.
My first vice president in charge of finding cool links happened upon this one this morning: www.mffais.com, which has a sortable database of how much every mutual fund had invested in every stock. Here’s the page for Caterpillar.
Scroll down and you’ll see a list of funds on the left-hand side, with columns of numbers revealing how many share they own, how many they sold, how many they bought, how much they won or lost, and so forth. Clicking on the gray column headers sorts the data, which yields cool data such as:
- Who owns the most Cat shares: Capital World Investors, 42,236,500 shares (which also produces the highest value, $1,314,822,245, and the greatest loss: $-246,238,795)
- Who sold the most: Wellington Capital Management, 7,249,924 shares (reported in November 2008).
- Whose shares gained the most: Disciplined Growth Fund (American Century Quantitative Equity Funds Inc), 6202.03 %
- Who bought the most lately: Eaton Vance Management, Feb. 11 2009 (report date, not the actual date of the transaction), 1,418,907 shares.
Disclosure: I sold most of my Wellington fund about the same time.
Terex, one of Caterpillar’s smaller competitors in the mining and construction equipment space, took such a royal pummeling yesterday that I figure it’s worth mentioning even if it makes me look like a slacker for not blogging the news as it happened (you get what you pay for in the blogging business).
The real news started after the bell Wednesday, when the company reported a huge loss and said it expected mass layoffs. It got worse yesterday when an analyst noted the company is in danger of violating a covenant on debt due in April. Terex lost a third of its value in the space of 24 hours (though it was up a few percentage points this morning).
You have to wonder what Terex investors were thinking up until the day before yesterday. Cat shares were off by a third from their December high to their February low; it’s hard to imagine TEX avoiding a similar fate.
Terex’s earnings report sounds eerily familiar:
Ron DeFeo, Terex Chairman and Chief Executive Officer, stated, “This past year has been like no other – the first half of the year exhibited robust growth and expansion, while the second half of the year was severely impacted by the global credit crisis and economic deterioration, which drove significant declines in customer demand in our businesses. For the full year, net sales increased significantly in our Cranes and Mining businesses, but were offset by the results in our Aerial Work Platforms, Construction, and Materials Processing businesses, which experienced considerable weakness in the second half of the year. Excluding the goodwill impairment charges, our net income for the year was good given the economic environment. Although we are disappointed with our current working capital levels, we have taken aggressive actions to adjust our production to meet reduced customer demand. We maintained a strong cash position and ended the year with a solid balance sheet and sufficient liquidity to execute our key business plans.”
Mr. DeFeo continued, “Given the current market conditions, it is difficult to project 2009 performance with a reasonable degree of certainty. However, we are planning for continued softness in demand. We are experiencing increasing levels of cancellations in our backlog for crane and mining products, as well as delays in acceptance of deliveries, as our customers in these areas are not immune to the effects of the global economic downturn. Based on what we know today, we expect our net sales for 2009 to decline by 30% to 35% from 2008. The translation effect of foreign currency exchange rate changes is expected to contribute approximately 13% of this decline. Given the uncertainty and volatility in today’s environment, we are not providing earnings guidance until we have better visibility; however, we will continue to take aggressive actions to reduce operating costs and improve our cash flow.”
Ah, that old “lack of earnings guidance” bugaboo: it’ll bite you every time.
Perhaps TEX investors did not expect the company to take a $460 million Q4 loss for “goodwill impairments in the Construction, Roadbuilding and Utility Products businesses, where the recorded value of those assets exceeded their fair value due to lower projected results for these businesses resulting from adverse market conditions.” Goodwill losses don’t affect cash flow much, though lowered asset values would mean less collateral to borrow against.
Looking ahead, Deere’s in the headlights next week:
WEDNESDAY, Feb. 18
WASHINGTON — Commerce Department releases housing starts for January, 8:30 a.m.; Federal Reserve releases industrial production for January, 9:15 a.m.; the Federal Open Market Committee releases minutes from meeting held in January, 2 p.m.
NEW YORK — CBS Corp. reports fourth-quarter financial results.
PHILADELPHIA — Comcast Corp. reports fourth-quarter financial results.
MOLINE, Ill. — Deere & Co. reports first-quarter financial results.
AKRON, Ohio — Goodyear Tire & Rubber Co. reports fourth-quarter financial results.
PALO ALTO, Calif. — Hewlett-Packard Co. reports first-quarter financial results.
AUSTIN, Texas — Whole Foods Market Inc. reports first-quarter financial results.
I was at my real job when Obama came to Peoria and Caterpillar CEO Jim Owens managed to muck up a pretty good photo op by doing that thing they taught us to do in Peoria when asked a direct question: say what you think the truth is.
Something you develop in the news biz is a BS detector — mine was pegged the other day when Obama was allegedly going to say Owens promised to recall recently laid-off workers if the stimulus bill passed. It was all based on an unnamed “source” quoted in the Journal Star and carefully hedged to really mean “we’ll start rehiring if the version we want gets passed (though we know this will never happen by the time the Beltway Sausage Factory gets done with it).”
Mr. “Audacity of Hope” is not above exploiting fearful people’s hopes for better days to get legislation passed. Refreshing because it exposes him as politician vs. messiah. Mr. Yellow Father, however, has to answer to the people who have their personal fortunes (and $18 billion worth of stock) invested in his enterprise; he gains nothing by handing out false hopes.
I don’t really think Owens and Obama contradicted each other: Obama’s package should help companies like Caterpillar stop firing and start hiring. Owens just said it would be farther down the road than many had hoped, and that more jobs may be lost before things turn around and hiring resumes. If this surprises you, congrats on returning from your vacation on the Mars Riviera.
(I had to work late last night to get a story in the paper about a plane crash that killed 50 people … puts all this in perspective).
Caterpillar started bad, rallied a tad, sank again and then bounced hard into the close to finish just a whisper from the green Thursday as the markets digested the possibilities of Obama’s Billions. Full quote at Yahoo Finance.
Indexes did much the same: Dow, down 0.09%; Nasdaq, up 0.73%; S&P 500, up 0.17%. Wrap-up at Market Watch.
Cat’s volume of 13.6 million shares was a bit above normal, but the chart pattern is encouraging: a day when the stock tanks at the open and struggles all day, then surges into the close often means a rally’s in the works. Most notably: Support held at $30, as it has several times already in the past couple weeks.
Architecture News Record says economists expect construction to plunge this year:
The semi-annual forecast, which is compiled in conjunction with top economists, predicts that there will be an average 11.1 percent drop in non-residential construction spending in the first half of 2009. The rate is more than 10 times that of the last six months of 2008, when non-residential construction output was forecasted to dip 1.2 percent, for the first decrease in years.
In the current forecast, which includes data provided by Moody’s, FMI, Global Insight, Reed Business Information and McGraw-Hill Construction, some sectors fare far worse than others. Hotel construction, for example, could post a 20.2 percent loss, the largest in the survey, while power plants and factories might see a 11.2 percent cut.
No sector comes out unscathed, including publicly funded projects. To wit: even spending on firehouses and police stations, which are lumped under the “public safety” category, could shrink 3.5 percent. In contrast, in 2008, that sector was predicted to grow by 5.9 percent.
None of this accounts for the massive stimulus bill Obama is about to sign into law, of course. And we all know construction is just one facet of Caterpillar’s business. Perhaps the best indicator to watch is the Architecture Billings Index, which collapsed last fall.
Historically, architects’ billing numbers have been canaries in the coal mine for builders; if they go down, builders will suffer, too, about nine to 12 months later. And the numbers in this cycle don’t bode well.
The AIA’s Architecture Billings Index, which is compiled from statistics provided by firms, has hovered below 50 for 11 straight months, and anything below 50 represents a billing decrease. In November, the index hit 34.7, the lowest point in its 13-year history.
More on the American Institute of Architects at its Web site
(look for News and Press Releases)
The theft of the Caterpillar in Yonkers last July, however, proved to be their undoing, as the suspect at the wheel of the $250,000 piece of equipment crashed into an overpass, sparking a multicar accident, authorities said.
The Caterpillar kept going, but when a suspect later sought replacement parts for the damage, he was captured on surveillance video, giving investigators one of the clues used to indict 14 suspects.
The group made its money selling stolen cars – including Porsches and BMWs – and construction equipment in several eastern states as well as in the Dominican Republic, Police Commissioner Ray Kelly said.
“Some people smuggle jewelry out of the country,” Kelly said. “Other people smuggle Caterpillars and Hummers and large construction vehicles. The suspects made up for lack of finesse with sheer audacity.
I guess the consolation during your stretch at Sing Sing is the admiration of your peers.
Wall Street Journal’s Heard on the Street column mentions Caterpillar and a few other corporate giants that have gaping holes in their pension obligations that they must attempt to close.
The pension headache is hitting companies already under huge pressure to cut costs. Caterpillar recently announced 20,000 job cuts and warned that it may post its first quarterly loss since 1992.
Caterpillar’s U.S. pension had $10.4 billion in assets at the end of 2007 — $700 million less than its obligations. Caterpillar’s pension assets likely shrank by about $2.8 billion last year, assuming the 70% of its portfolio dedicated to equities fell 40% and, generously, the 25% invested in debt rose 5%. The company says it will contribute close to $1 billion to its pension this year. But that could still leave a hole of as much as $2.5 billion.
Did you get that? Seventy percent of Caterpillar’s investments to fund its retirees’ golden years is invested in stocks. I’m sure this is true of every other company out there still providing pensions. After all, stocks offer the highest long-haul returns, right? Except when they do fun things like lose half their value in six weeks.
Add to this the mega-billions invested via 401(k) and a troubling picture emerges: basically an entire society built on a foundation of asset inflation, from stocks to derivatives to real estate. And right now we’re experiencing massive asset deflation in a society built for prices to go only one way: up. We should be thankful the lights are still on.
Inflation results from too much money chasing too little product. Over the past 10 years in particular the new money came from two sources: China, which was actually building wealth, and Wall Street, which was papering the planet with soon-to-be worthless securities. (Remember it was the voracious appetite for U.S. mortgage paper that enabled the subprime abuses that got us here: if it hadn’t been for the absurd riches to be made in dealing this paper, none of the “lending standards are for sissies” nonsense would’ve ever happened.)
This might be the real reason the bear market isn’t going away: nobody knows where the firehose of money is coming from to start the next inflationary cycle. All those who nearly drowned in the last raging flood of cash have become too timid to turn on the tap.