March 11, 2015

Doug Kass on Caterpillar stock

Caterpillar is one of the finest examples of a company that "over promises and under delivers." It is also a vivid example of (thoughtless) cheerleading by analysts and in the business media.

Wall Street rejoiced, and CAT's shares traded near $110 after the third-quarter report last November. There was little meaningful forward-looking analysis or questioning of the results at that time by most analysts or by the business media, which seems to worship the company's management (an "honor" that's little deserved).

Caterpillar is another example of a company that buys high (its share price) and sells low (or doesn't buy stock at low prices). Its capital-allocation policy is among the worst in corporate history.

Remember CAT as a possible template in the future when the media and others rejoice in financial engineering in the face of weak top-line growth.