Heavy equipment manufacturer Caterpillar (CAT) looks like a safe bet on the surface. It yields almost 2.9% and has more than $65 billion in annual revenue.
But CAT is far from a good investment right now as the global growth outlook continues to be grim, particularly in the manufacturing-heavy economy of China.
Shares are off about 7% year-to-date, sparked in large part by three consecutive earnings misses. In January, it was a big writedown thanks to fraud at a Chinese company it acquired, in April it was an earnings miss and disappointing guidance, then in July it was an ugly 43% slump in profits.
I’ll give you one guess as to how earnings will go in a few weeks, then …
The global mining boom in the wake of the financial crisis helped power Caterpillar shares a few years ago, but the subsequent commodity crash thanks to a slowing China has made those mining sales dry up. And like it or not, commodity stocks and related businesses like Caterpillar have been left out of the rally in 2013 … and could continue to sit out for a while longer.