Bullish on Caterpillar; Maybe or Maybe Not?

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Caterpillar sign

With an over 70% increase in stock price for 2017, Caterpillar Inc. [NYSE: CAT], is now classified as a stock poised for greatness on the market for 2018. CAT is currently ranked number 1 in the Industrial Machinery Category of the stock market out of 52 securities.

Caterpillar is a manufacturer of mining and construction equipment, engines and turbines. CAT’s performance can be attributed to a strong demand for machinery in the US, cost control efforts and its vigorous sales through exports.

At the end of trading yesterday, CAT was trading at US$161.96 but has now increased to US$166.03; a 2.51% increase in just 24 hours. The volatility in CAT’s stock price is quite evident and may be risky to many investors. But is it a risk worth taking?

It is always risky buying stocks that are trading high. The market can be unpredictable and unforgiving but this is where knowing what type of investor you are, comes in handy.

Know your risk-reward ratio i.e  risk tolerance.

On the one hand, investors who are not confident in the positive performance of CAT in the future, now is a great time to sell. The current fair value for CAT is at US$101, with a current price of US$166.01; therefore you’ve made the capital gain.

On the other hand, for optimistic investors, CAT is a stock worth holding and buying more. With its top-tier management, loyal customers and the demand for its products and services, we expect CAT to perform above estimates in 2018.

What do you think?

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