Message Font: Serif | Sans-Serif
No. of Recommendations: 2
You can look at a 50 year history of CAT in the DOW charts from here:

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.

Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.