Caterpillar (CAT) announced some dismal looking outlook today for their company and the economy. As a company last year they did well however they took it on the chin in the 4th quarter. As a result they are anticipating a 25% reduction in revenues for next year.
In going through their annual report, much of their sales increases for machinery happened in the Asian and South American markets, alot due to higher commodity prices. The outlook for 2009 commodity prices is extremely bearish for the year with some hopeful recovery by the end of '09. They've forcasted oil to be trading in the $40 per barrel range and coal to be trading at depressed prices.
A couple of things that did stand out to me was that they felt alot of the mining and metals industry desperately needed to upgrade their equipment and that the out of date infrastructure could contribute to supply problems again when demand comes back. Also, they see some potential with the upcoming stimulus packages by various governments focusing on infrastructure projects.
I think CAT at this price is interesting. It got hammered today because of the 4th quarter results and their bleak outlook for 2009. Now that that initial knee jerk reaction is in and the bad news is being baked in, the stock could see a good pop down the road if things improve quicker than anticipated. Also, as a longer term hold this looks very attractive with higher commodity prices a certainty in the future.
Monday, January 26, 2009
Friday, January 16, 2009
FCX Roller Coaster
Freeport McMoran has been all over the place as of late, as has been the price of gold and copper. On Jan 6 it touched above the $30 mark, so if anyone was following since the recent low in Dec in the $19 range, it was a pretty good buck.
Commodites are all over the place right now and the big factor is demand. However, Freeport is the largest producer in the world of copper and two things come to mind when looking into the future. One, Freeport has cut back on the production of copper at these prices. Short term is won't necessarily affect the price but when demand comes back, its alot easier to stop than to start up and there will be a supply shortage. Two, demand will come back as governments all over the world have targeted infrastructure projects as a way to turn the momentum of the market. Huge construction projects in the US, Canada, China and Europe will all require alot of copper. I wonder if companies like Freeport will see a good run after Obama's launches his stimulus plan.
And of course, don't forget about Gold as the hedge to the upcomming hyper inflation from all the governments printing money. It will take some time to feed into the system, but the US government seems bound and determined to devalue their currency. The inflation play may be the biggest investment play for the next ten years.
Commodites are all over the place right now and the big factor is demand. However, Freeport is the largest producer in the world of copper and two things come to mind when looking into the future. One, Freeport has cut back on the production of copper at these prices. Short term is won't necessarily affect the price but when demand comes back, its alot easier to stop than to start up and there will be a supply shortage. Two, demand will come back as governments all over the world have targeted infrastructure projects as a way to turn the momentum of the market. Huge construction projects in the US, Canada, China and Europe will all require alot of copper. I wonder if companies like Freeport will see a good run after Obama's launches his stimulus plan.
And of course, don't forget about Gold as the hedge to the upcomming hyper inflation from all the governments printing money. It will take some time to feed into the system, but the US government seems bound and determined to devalue their currency. The inflation play may be the biggest investment play for the next ten years.
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