First we would request our Dear Readers to inhale deeply.
Re: Is this what passes for analysis these days?
That's better. What you are going to read may upset your sensibilities. And we apologize in advance.
Re: Is this what passes for analysis these days?
In the Jan 22 issue of the WSJ, Steven Russolillo writes about GE stock getting ahead of itself, having pierced the 30 dollar level for the 1st time since 2007. Since 15 % of GE industrial revenues come from the oil and gas sector, the author feels the rich 19 times forward earnings is unjustified. And uses Caterpillar as an example of an industrial stock with not a heavy exposure to oil and gas.
Forgive, us, Mr. Russolillo, we believe Caterpillar is exposed to the upstream segment of Oil and Gas. And also exposed to mining, which is actually in the middle of an even worse slowdown, as seen in your own publication.
And you conveniently skimmed over the high debt exposure for Caterpillar.
We did warn you, dear readers. Be well.
And thank you!
Re: Is this what passes for analysis these days?
The article did mention two other Industrial stocks with lower forward P to E - Honeywell and Deere.
Granted both have less exposure to oil and gas. But DE has a huge debt issue. The big mistake the author has made is to consider ONLY ONE METRIC - in this case forward P/E.
As our readers who have read the Cyclical stocks thread well know, P to e for a cyclical stock can sometimes give you a head fake.
Re: Is this what passes for analysis these days?
Full disclosure - we own GE stock and have a modest 35 pct gain excluding dividends. We have held it for several.years, and woukd certainly not rate it as our best pick. We bought it for the wrong reasons before the 2007 financial crisis, and have been luck not to have our ash handed to us in a copper platter -(copper is cheaper nowadays readers).
We have also talks abt the CAT debt exposure, and possibly about DE debt exposure also. We doubt we have such a huge following as to impact the trading prices of said shares that we have talked down.
Lest there is any confusion, we are not endorsing GE - we simply think comparing GE with other Industrial stocks ON ONE METRIC is not very prudent. And stating CAT does not have heavy exposure to O&G When it has, and NOT stating it's heavy exposure to mining has a misleading effect on green readers.
Not that it would affect our regular readership.