Investing in Caterpillar


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Investing is not always the most clear cut form of long term money growth and wealth building. Every now and then there are companies that practically hand over their brand name and seemingly serve success on a silver platter. Through smart internal restructuring, and allocating funds away from costly projects and departments and into marketing and profitable departments. Caterpillar has shown investors that despite failing global demands for new construction and mining equipment. Investing in Caterpillar as company is not just a smart choice, but is an investment in an industry leader whom intends to stay on top. Last quarter proved to be a very successful one for Caterpillar. It spent money on revamping not only itself, but also by making the necessary adjustment to solidify itself as a strong contender in the global market, and a worthy company to continue on in its rich manufacturing history.

Cutting CostsInvesting in Caterpillar 2

Caterpillar in the last quarter of 2013 made tremendous strides towards improving their stock prices and effectively solidifying their place as a provider of heavy equipment, engines, and generators. While historically Caterpillar has been a strong company with a clear line of sight within the projections of their intended markets, the global economy has also made Caterpillar a victim of circumstance. But unlike most victims of circumstance, often the winners are not the ones who lie down and let circumstance rule their business model. Caterpillar cut costs by shutting down plants and laying off an expensive workforce, in under producing areas. Just by closing ineffective plants and cutting expensive programs, just in the last year, Caterpillar was able to save itself roughly two billion dollars, in just one year! That money was then redistributed amongst the company, and reinvested in acquiring new ways of marketing to newer markets and customers.

Maintaining Repeat Customers

Often the first advice any senior investor gives to a novice investor, is to look at how the market changes over time and if you are going to invest in a company that manufactures a product, make sure that the product is something that doesn’t last forever, because in order to make a profit, servicing and new sales will guarantee steady profits. Since construction, mining, and heavy equipment don’t usually come to mind when applying this type of advice, it is none the less applicable. This is the same kind of thinking that the Caterpillars board had when they approved a company wide ten billion dollar buy back of old and outdated equipment. Think when investing in Caterpillar, of a company that understands that the importance of productivity not just on the internal production side of their own company, but of the companies that purchase their equipment and rely on the machinery on a day to day basis for profit and success as well. Caterpillar is virtually synonymous with constructing and mining equipment, whether you are a child playing with toy trucks and heavy equipment, or a construction company or professional looking for equipment that not only last but perform, a handful of names come to mind, Caterpillar usually being in the top spots.

Investing in Caterpillar 3Profit and Stock Price

One year ago as of last quarter, Caterpillar reported a total quarter profit of about 26 million dollars. Now fast forward to the 4th quarter in 2013, the reported profit hit just over 500 million dollars in profit. By enacting these small changes in how the company has reinvested in the future of their company, brought on significant results. While stateside, the housing and construction industries have slowed, even as the recession is apparently starting to dissolve; Caterpillar has invested in the markets where economic growth have begun to boost. While the U.S. may still be struggling, economically speaking, China has risen slightly each year with interior renovation projects of the infrastructure in modernizing the country. Heavy equipment sales in China have risen remarkably well. 2014, according to economists and Caterpillar, see that China’s economy will continue to rise at least another 7.5% just in the next year alone. Between last year and this upcoming year, Caterpillar has noticed a 30% rise in profits as far as their excavators and construction equipment. As China grows, so to do the countries globally linked to mining and 3rd world development pushing for the rise in mining and construction and heavy equipment sales. By the end of 2013’s 4th quarter, Caterpillar stock prices were only just slightly below $90.00 per share, boosting the market in that sector almost on its own.

Investing in Caterpillar is showing itself to be an easy and safe bet. This years projection is already at $56 billion and although that is slightly behind what was made last year at this time, the renovation of Caterpillar now will prove invaluable. By simply cutting costs and reinvesting in the future and profit projections of the company, understanding the growing markets in Asia and the demands of prior customers, Caterpillar has already taken the necessary steps in continual profit building and long term success.

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