Taking a Look at Bellwether Stocks
Wednesday, October 24th, 2007
By Mitchell Clark, B.Comm. for Profit Confidential
One of the best bellwether stocks you can follow is Caterpillar, Inc. (NYSE/CAT). This company is so well run that not only is it an indicator about the health of the domestic economy, but it’s also a benchmark in terms of how well the global economy is doing.
Recently, the company reported third-quarter financial results that just missed expectations. Revenue growth was there, but earnings came in just below consensus Wall Street estimates.
According to the company, it generated third-quarter revenues of $11.44 billion, up a solid nine percent from revenues generated in the third quarter of 2006.
Net earnings were nine-hundred twenty-seven million dollars, or $1.40 per share, as compared with net earnings of seven-hundred sixty-nine million dollars, or $1.14 per share, generated in the third quarter of 2006.
The company reduced its earnings guidance for the full year, but still expects solid revenue growth going forward.
So far this earnings season, I’d say Caterpillar is representative of what most companies are reporting. Top-line revenues are solid, but earnings are just slightly below where the market wants them to be. In a sense, the numbers aren’t anything to write home about.
Another company that I like very much and that’s always worth keeping an eye on is Deere & Company (NYSE/DE). This stock is due for a split. The stock just crossed the $150.00 per share mark and is another bellwether stock that’s a good indicator of the health of the agricultural market.
The commodity price cycle is going to move its enthusiasm toward agricultural commodities over the next few years and companies like Deere are going to benefit.
Caterpillar is benefiting from strength in the mining industry, but perhaps business is slowing a bit as metal prices have come back down somewhat. Even though Deere’s stock price is up some 50% this year, I’d be a buyer of this stock if I was creating a long-term, conservative equity portfolio.
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Mitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.
