The selling continues after Caterpillar strong earnings
Today, once again, the US market released some good numbers from Merck, Coca cola and more particularly Caterpillar. I say more particularly because it is a stock Japanese investors always look at when comparing to Komatsu and Hitachi Construction Machinery. The US market will probably continue its rebound tomorrow after Apple released very strong results.
Here I am going to focus more on Caterpillar as I have both Komatsu and HCM in my portfolio. I have been reducing my position for a while now and actually I will terminate both position at the close of tomorrow's market. Caterpillar's earnings (CAT US) were excellent at the first sight but when looking deeper into the revenue you can see a few things:
Finally, I have one more general concern. Investors are happy with cost cutting at the moment but to me it is actually really scary. If every big companies are cutting cost at the same time, when revenue growth is just not existing, that means that someone or some companies out there are feeling the pain. If you cut cost somewhere that means you are cutting margin and revenue greatly from other companies. My guess is you have two thing going on: massive lay off and pressure on smaller companies are the reasons for all the cust cutting we are seeing. If revenue growth does not come back soon, small companies will have a hard time staying afloat and it will be very negative for the market.
I decided to sell my position in Komatsu (-2,02%) and HCM (-1,01%) as well as shredding my position in GS Yuasa (-1,5%) because I continue to think the market is overbought at these levels. IYou can see the charts below where it is clear the trend lines have been cut to the downside and only now the market is making a pull back to the new resistance line (very typical of such pattern formation). I will continue to add weight in Daiichi Sankyo (1,5%) and start a new position in Shionogi (3%) as I continue to prefer pharmaceutical stocks in this environment.
Here I am going to focus more on Caterpillar as I have both Komatsu and HCM in my portfolio. I have been reducing my position for a while now and actually I will terminate both position at the close of tomorrow's market. Caterpillar's earnings (CAT US) were excellent at the first sight but when looking deeper into the revenue you can see a few things:
- Revenues are below analyst expectation and well below last year's number
- Earning are coming mainly from emerging market
- Caterpillar's CEO continues to be really careful about the future, trying to keep CAT profitable for the year and expecting a loss in the thrid quarter of '09
Finally, I have one more general concern. Investors are happy with cost cutting at the moment but to me it is actually really scary. If every big companies are cutting cost at the same time, when revenue growth is just not existing, that means that someone or some companies out there are feeling the pain. If you cut cost somewhere that means you are cutting margin and revenue greatly from other companies. My guess is you have two thing going on: massive lay off and pressure on smaller companies are the reasons for all the cust cutting we are seeing. If revenue growth does not come back soon, small companies will have a hard time staying afloat and it will be very negative for the market.
I decided to sell my position in Komatsu (-2,02%) and HCM (-1,01%) as well as shredding my position in GS Yuasa (-1,5%) because I continue to think the market is overbought at these levels. IYou can see the charts below where it is clear the trend lines have been cut to the downside and only now the market is making a pull back to the new resistance line (very typical of such pattern formation). I will continue to add weight in Daiichi Sankyo (1,5%) and start a new position in Shionogi (3%) as I continue to prefer pharmaceutical stocks in this environment.