Caterpillar Inc. (CAT) Is Being a Dog, but Not for Long

Others in the space

Joy Global Inc. (NYSE:JOY) is a worldwide provider of mining equipment, after-market parts, and services. Its stock has taken a hit on the same economic news as Caterpillar, so it too has the potential for a strong run higher. Joy is much smaller, but it has the power to continue taking share in the space. This stock has also been involved in many takeover rumors, which shows that other companies know it’s undervalued. I think Caterpillar should take a deeper look into this company and make an offer.

Deere & Company (NYSE:DE) is the world’s leading manufacturer of agricultural equipment. It also manufactures construction, forestry, commercial, and consumer equipment. Over 50% of Deere’s revenue comes from agricultural customers, making it less susceptible to the woes of the mining industry while still having exposure. This is a great play if you’re skeptical of a global economic recovery and want to make a bet on agriculture instead. Deere, like Caterpillar Inc. (NYSE:CAT), reported record earnings in 2012.

Current stock snapshot

In the final minutes of trading on March 26, Caterpillar was at $86.96. At this price, it is trading at just 10.2 times current earnings and 7.8 times 2015 earnings. With these multiples in mind, Caterpillar has become a great value and should be bought. It is over 20% below its 52-week high of $109.77 reached in April 2012, and I think it could return to these levels over the next few months.

The Foolish bottom line

The pullback in Caterpillar Inc. (NYSE:CAT) is providing investors with an entry point into one of the greatest companies in the world. Caterpillar is “best of breed” and will have monstrous growth as the global economy strengthens. I currently own Joy Global, but I am looking to swap into Caterpillar if it drops below $85. Take a look and see if this is a long-term investment your portfolio needs.

The article CAT Is Being a Dog, but Not for Long originally appeared on Fool.com and is written by Joseph Solitro.

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