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Sunday, 03/18/2001

CAT - Caterpillar Inc.

Company Description

Headquartered in Peoria, Illinois, Caterpillar (NYSE:CAT) is the world's largest manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. It is a Fortune 100 company, ranked #1 in its industry, with more than $26 billion in assets.

A U.S. based global competitor, Caterpillar records half of its sales to overseas customers. Caterpillar has maintained its position as a leading U.S. exporter with U.S. exports of $5.2 billion in 1999.

Caterpillar products and components today are manufactured in 42 plants in the United States and 49 plants across the globe in Asia, Europe, South America, Russia, China, South Africa and Australia.

(source: Caterpillar)

Reasons To Invest

Shares of Caterpillar represent a solid long-term investment because of the company's superior management team and ability to execute. For those two reasons alone, the stock represents a compelling story for long-term investors. Plus, the company pays a healthy of dividend, which is obviously attractive to anyone concerned with long-term investing.

Beyond the financial stability of Caterpillar, there are several intermediate-term events that may make the stock attractive to investor types. The Federal Reserve is cutting interest rates in an aggressive fashion, and their actions will greatly impact those companies closely tied to the business. And Caterpillar is on of those companies that is closely tied to the business cycle. The company makes heavy machinery that is obviously needed in the building and construction that is prevalent when the economy expands. And many analysts believe the U.S. economy will advance in the coming six to nine months with the Federal Reserve on the offensive in terms of monetary policy. Industry analysts that follow Caterpillar expect demand for the company's products to increase as the economy begins to pick up steam, which should allow for its stock price to advance for the next 18 months to two years.

The only cause for concern regarding Caterpillar here is the problem with Japan. Some feel that the Japanese economy is slipping into a downward spiral that could drag the rest of the global economy with it. Since Caterpillar is a major exporter to Japan, the concerns are for real and should be addressed. However, the fact that interest rates are headed lower in the United States will more than offset any problems from Japan. And because Caterpillar is the clear leader in its market, the current turmoil abroad may give the company a head start over its competition and the ability to exploit opportunities first.

Caterpillar does represent a very cyclical company, which means it is closely tied to the broader business cycle. And the bullish argument for the stock over the next two years is predicated on the belief that the U.S. economy will expand again in the wake of the lower interest rates set fort by the Federal Reserve. However, for those investors looking beyond the next two years, the stock does represent a solid candidate for a core holding within a diversified portfolio. And the reasons Caterpillar is so attractive for a buy-and-hold strategy is because of the company's superiority in financial performance and management ability.

DRIP Information:

Shares to Qualify = 1           Accept Foreign Accounts: Yes
Auto-reinvestment  = Yes        Temper Enrollment Serv:  Yes

Min/Max Investment = $50 - $350,000/year
Reinvestment Fees: 
Dividend: 5% to $3+3c/sh  Cash: $5+3c/sh  Auto ReInvest: $2+3c/sh

Transfer Agent:

Current Stockholders:

First Chicago Trust
1-800-446-2617

Non-Stockholders:

1-800-955-4749


Industry Group: Heavy Machinery   52-week high=$49.63
Annual Dividend Per Share=$1.36   52-week low =$29.00
Last earnings 01/00    est=0.64   actual=0.76
Next earnings 04-15    est=0.53   versus=0.73
                                  P/E = 15
Analyst Ratings:
Strong Buy    = 6
Moderate Buy  = 9
Hold          = 4
Moderate Sell = 0
Strong Sell   = 0

 
 

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