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Author: StevnFool Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 222611  
Subject: Re: OT: Mr. Market in foul mood with Caterpillar Date: 9/27/2012 1:14 PM
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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.

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