Join our community of smart investors
OPINION

The very hungry Caterpillar

The very hungry Caterpillar
March 2, 2017
The very hungry Caterpillar

To that add President Trump's election pledge to invest in infrastructure and "make America great again", to favour US-based manufacturers who create good jobs, the shoddy state of their bridges and now dams, and you can see where I'm coming from. If London's Evening Standard newspaper is to be believed, Britain ranks 27th in the world for the state of its highways, trailing France and Germany, ranking below poorer countries such as Ecuador, Malaysia and Namibia. And factor in the possibility that global interest rates are at record lows and might go even lower, for even longer, so that the financing of the purchase of heavy-duty equipment becomes less onerous.

The biggest of this bunch is Caterpillar Inc of the US (US:CAT), ranked as number one for the past 14 years and raking in a whopping 18 per cent of the revenue of the Yellow Table top 50. Its share price and traded volume have mirrored the boom and bust of the commodity cycle of the past decade or so, but since 2012 has held inside a wide band roughly between $65 and $115. Last year's rally in a neat channel should continue to $110-$112 this year.

 

Caterpillar

 

In the number two slot for a second year running with 10 per cent of global sales is Komatsu of Japan (JP:6301) whose price chart looks steadier holding between 1,500 yen and 3,000 yen since 2010. As we're so close to long-term highs, further gains will require a leap of faith.

 

Konatsu

 

Europe's biggest and probably the world's third-largest by volume is Staffordshire based JC Bamford Excavators Ltd, which is to diggers what Hoover is to vacuum cleaners. Being privately owned by the family, it has no listed shares. So battling it out for this slot is another Japanese company, Hitachi (JP:6305), which looks much like its bigger brother Komatsu, and Terex Corp (US:TEX) of the US. This latter one actually looks cheap compared with the others and to its historical price chart. Rallying last year in two neat steps, trading at a fraction of 2007's spike high at nearly $97 - although nearly six times its low in 2000 - it is not overbought. A rally to $50 or more is possible this year.

 

Terex

 

We also have a tussle for the fourth slot between Sweden's Volvo (SE:VOLVb) and Liebherr of Germany, owned by a very hands-on family of billionaires. Shares in the former have really been sprinting smartly higher since last summer and, like Komatsu, are testing the upper reaches that have capped since 2010. Because bullish momentum is stronger than it has been in years we feel that a squeeze to 2007's record high at €151.50 (£129) is possible. We remind that as with all international investing one must consider one's currency exposure.

 

Volvo