Thursday, January 8, 2009
(Cont'd from above)...

Jim (cont'd):    Now, I think Cat can do well in the second half of 2009. But for the moment, I have trouble believing the U.S. stimulus package is real…you know what is killing me here…. I’ll tell you what is killing me here. Obama should tomorrow call Caterpillar and place orders for enough tractors to get that assembly line going and get ready for construction bidding…. Even though he is not even president yet… The stimulus package will be a pastiche… a mosaic… maybe even just a parlor game of old tricks… like extensions of …. in the real version we cut all that stuff out… benefits, handouts to the states… we need Cat… that we know if we want a real stimulus… if a real stimulus is real… Caterpillar gets orders. Plus, I mean come on… Obama is from Illinois… this company is in Peoria. It is driving me nuts that he is not shaping up to be a patronage kind of guy… show some love to your home state Barrack… show some love to Caterpillar. And don’t forget the added advantage that they make the best machines. It is too bad they are in Illinois not California… because I know that Nancy Pelosi would be ordering billions of dollars of these machines… on our tab… just so you can see her ride one on the HWY 101... the Cat Commuter Rail… and by the way.. by the way… I have been thinking a lot about this, I am not that political… okay, I say it upfront… I am not that political… I think it is ridiculous that Burris should be seated in the Senate… I think it is fine that he not be at the Eagles/Giant game Sunday… I mean he always crushed the Eagles secondary… but after the wide receivers bad in the club judgment… I mean come on the Senate.. it seems wrong to me… but then again I am just a simple sports fan...

Now, back to Caterpillar… this stock has run up big since Obama came out with his infrastructure plan a few weeks ago… while I like it as an infra play… the estimates are still way too high… at the end of 2008 all regions showed slower sales growth in machinery business… engine business did pretty well… 3 months sales up 8%, compared to 6% the previous month… I just don’t think the declining global demand for Caterpillar’s equipment has let up yet… and the 1st quarter will be terrible… you own this for the second half… when housing bottoms… the clock be ticking… and world wide stimulus orders should kick in… until then, owning Cat is just going to be about the dividend… that is why I think you should wait until the stock goes below $40... where it has an accidentally high yield of 4.3%… before you pull the trigger… Cat’s yield is only… this is what I am about to introduce, it is called rigger… Cat’s yield has hit 4% 3 times in the last 20 years before the current market meltdown… every time, you would have made money hand over fist if you bought it there… first in October of 1990, 44% gain within 5 months… October of 2000, yield hits 4%, 62% gain in 6 months… October of 2002, again 4%, 135% gain… I don’t think this time is any different… I see Caterpillar going to 55 by year end… but I think it will go lower before it goes higher.. I just want you to be able to pull the trigger when it happens.

Once, Cat becomes an accidental high yielder… I mean, look, you know what this is… it is a partial no-brainer… because Cramer is too wise and too wizened to call anything a no-brainer… except for Jack Nicholson at the end of “One Flew Over the Cuckoo’s Nest”… yet… I think the dividend is completely secure… Cat’s expected payout for this year is $1.72... and expected cash flow is $7.63... hugely covered… plus Cat’s recent decision to freeze wages and fire a boat load of people… made it crystal clear that the company is committed to maintaining it’s dividend… even in really tough times.


Here’s the bottom line...

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The Bottom Line!:     Caterpillar Inc. (CAT) is one of my five favorite stocks in the Dow for 2009... but unlike the others, I am telling you not to buy it here… not here… I want you to be ready when it goes below $40... put your hard hat on… becomes an accidentally juicy high yielder again… only then will you have a big winner.

CAT Could Be A Dow All-Star in ‘09, But I Think It’s Also A Good Dividend Play On A Pullback...

Alright, my fourth Dow All-Star is Caterpillar… but please wait until it goes below $40... I do not want you to get hurt… I’ve got one more Dow All-Star tomorrow… you won’t believe what that one is going to be.

[verbatim recap]

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Jim went on after this segment to take questions from callers, and responded with his comments...

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Q:    Housing is an overbuilt industry, and there is more supply than demand out there. As many as other construction workers, I am also laid off. Is this going to be a drag on companies such as Caterpillar?

Jim:    Well, it depends… if we can get stimulus going… if we get mortgage rates to 4 ½% … if we get China built, buying… and China is really more important than we are in a lot of ways.. . then I think we will be fine… but the housing component of it… I am calling for bottom in housing… but, frankly, it is not because of new supply… it is because of pent up demand… I don’t think Caterpillar’s housing business is come back anytime soon… as a matter of fact, that is their weakest business… I expect that to remain their weakest business… for at least 18 months.

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Q:    Since 1837, Deere & Co. (DE*) has been like a true born in the U.S.A. trademark, and with China’s real stimulus program, I wonder why they wouldn’t lean to John Deere as opposed to Cat? With China’s love of like trademark U.S.A… Levi’s, Coca-Cola, the brand names. And why the same reason wouldn’t apply in this case between Cat and John Deere?

Jim:    You are right… I think they will do a lot of business here… they are doing a lot of business in South America too… they are a great, great exporter… I own that for my charitable trust… it is up used… and it does have a lot of highway stuff… but it is primarily ag… ag is doing very well… we have had Deere on this show… we have had Caterpillar on this show… Deere is really, really doing well. It is just one more reason… you just gave… is to be buying John Deere.

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