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Ida Hansen
If BHP Billiton has Bullish Outlook, is Caterpillar a Buy?
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A recent article on this site reviewed the bullish outlook recently issued by BHP Billiton (NYSE: BHP), the world’s largest natural resources company.

BHP Billiton depends a great deal on China.  From its positive forecast, BHP Billiton obviously is bullish on the future for China.  That makes sense as there are many reasons to feel good about the outlook for China.  It has more purchasing power than any other country and world’s largest economy, by some measures.  Those and other factors, such as the highest savings rate on the planet, contribute to BHP Billiton looking ahead with optimism.

For that reason, investor should be bullish about Caterpillar (NYSE: CAT) for the long term, too.

Caterpillar is the world’s largest heavy equipment maker.  Like BHP Billiton, Caterpillar is a blue chip stock dependent on the China market.  Also like BHP Billiton, Caterpillar has not done well in recent market action.

For the last week, month, quarter, and six months, Caterpillar has fallen in stock price (chart below).

But, as with BHP Billiton, there are many reasons to be bullish about the future for Caterpillar.  It has many of the same positive indicators as BHP Billiton.  Those naturally lead to a bullish outlook.  Over the last year of market action, Caterpillar has risen nearly 20 percent.

The mean analyst projection from Wall Street has earnings-per-share growth for Caterpillar increasing in double digits over the five years as opposed to the previous half decade.

As investing legend Jim Cramer pointed out in his book, “Confessions of a Street Addict,” it is earnings that take the stock price higher over long term.  Contributing to the total return for Caterpillar is an above average dividend yield of nearly 3 percent.  Like Caterpillar, that is much higher than the average dividend yield for a member of the Standard & Poor’s 500 Index (NYSE: SPY).  Again, like BHP Billiton, the China market will return to lift the long term outlook for Caterpillar.




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