Large-cap Success from Big, Old World Manufacturing

large-cap stocksEconomic numbers from China now move U.S. equities. It never used to be this way, but times are changing fast. If you look into the financial results of most large corporations with international operations, you’ll notice that their earnings have been buoyed this year by growth in Asia, particularly China. Without sales to Asian customers, earnings in the first half of this year would have been a lot weaker.

One company that’s been a great success over the last year has been Caterpillar Inc. (NYSE/CAT). This company is a great benchmark stock to follow, because it sells heavy-duty construction and mining equipment all over the world. The health of the global economy translates right to Caterpillar’s bottom line.

The company has a lot going for it right now, because it is selling a lot of construction and mining equipment to a variety of customers. There’s still a lot of building going on in China and, as you know already, the mining industry is absolutely flush with cash. Sure, it would be great to sell more bulldozers in the domestic market, but with such a strong international presence, a company like Caterpillar can pretty much weather any storm.

Recently, Caterpillar announced plans to once again expand its manufacturing presence in China. Starting from one sales office in Beijing, the company now has 11 manufacturing facilities, nine sales offices and three research and development centers located throughout the country. The company is employing something like 6,000 employees in China.


Caterpillar’s latest manufacturing plant will produce mini hydraulic excavators and management expects production to begin in 2012. According to the company, China is the world’s largest market for mini excavators.

Caterpillar is a shining example of good business management in an otherwise difficult economic environment. The stock has been a tremendous wealth creator this year and has fully recovered from the stock market’s major crisis in 2008/2009. As a global benchmark, this Dow stock is always worth following, even if you have no interest in the heavy equipment sector.

A company like Caterpillar is building manufacturing plants in China because that’s where the growth is. That’s where the market is going. Times really are changing quickly and if we don’t change with them, the marketplace will leave us behind. Caterpillar is creating wealth for domestic stockholders because it is doing well selling bulldozers and mining equipment in foreign lands. The good news here is that a weaker dollar translates those sales into even more profits and dividends.