You can look at a 50 year history of CAT in the DOW charts from here:http://www.chartscreen.com/wp-content/uploads/50-Year-DOW-Ch...One thing that stands out is that the earnings of CAT can be quite cyclical. From eyeballing the chart, I would think that an EPS of $12 to $18 in 2015 looks like the sort of point that would be the top of a cycle.I didn't do the calculation, but I think you will find at the top of the EPS cycles, the P/E if often (quite rightly) lower than normal.I think you would want to factor this into your calculations.Also, it sort of looks like a company where it is hard to predict where the future EPS will be.If entering a position, perhaps writing a PUT would be the way to do it.May 2013 put with a Strike of $85 is currently bid $8.25 which gives a net entry price of $76.75 (extra margin of safety) or else a CAGR for 8 months on the region of 16%.Perhaps one to watch for a down day and write some puts.StevnFool
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