Stocks to Sell #4: Caterpillar (CAT)
Click to Enlarge It looks like Caterpillar (CAT) stock has finally realized that we’re in a bull market. After being dead money through most of the 2013 rally, CAT stock has taken off in the past three months with a gain of about 16% since Nov. 30. Now, its shares are nearing the $100 level — an area that acted as support in 2012 before becoming resistance last year.
While a breakout is certainly possible if the broader market keeps rising, the more likely scenario is that CAT will stall in the coming weeks. There’s more to CAT’s business than its mining segment, but this still represents the largest driver of its performance. With commodity prices likely to remain under pressure and mining companies looking to curb the capex excesses of recent year, Caterpillar’s business should continue to face headwinds.
Currently, analysts are calling for revenue growth of just 1.2% in 2014 — indicating that CAT stock may be premature in discounting a recovery. Use this rally as a chance to take profits or, at the very least, to sell calls.