Caterpillar, Inc.: Digging For Levels For Entry

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Daniel Snyder: Welcome to Stock Market Live. Oh, look at the crowd.

Austin Hankwitz: I love to see them flood in. They’ve all come. We’ve got all the big friends.

Daniel Snyder: Big crew. It’s like a list, but let’s just populate. Like immediately like the stars. Love it. While we’re – how’s everybody feeling on this Thursday? You guys feeling all right? We’re already for a 75-basis point hike. Awesome. Are you ready for this hike?

Austin Hankwitz: I’m ready. I’m ready. I don’t know if the market’s ready, but I’m ready.

Daniel Snyder: As I take right there, let’s go ahead. Let’s go ahead. Let’s go ahead and continue. Then welcome, everyone. I’m Daniel Snyder. This is Austin Hankwitz. This is Stock Market Live.

If you’re new joining us this week, thanks for hanging out with us on your dinner hour, your lunch hour, wherever you might be. Always grab a drink, hang out for a little bit, ask your questions, interact with us in the chat whether you’re on social media or here in the Zoom with us, because we’ve got a great show for you.

Austin and I were just talking before the show. It’s another one of these stocks that we’re diving into this week that we had no idea. Like, you know the brand, you know the name, you know the company, but when you really get into the numbers of the financial statement and everything of, like, how do they make their money, right? Is it just selling the product? Who do they sell it to? Wow, they make that much money doing it. Wow, they are bigger than the entire economy of Costa Rica, right? Like, you have these [Cross Talk]

Austin Hankwitz: Beyond that, I’m a reader like, I learned that they make money in two different ways. I’m not going to reveal who it is or what it is, right? But it was So, interesting to me to hear that this other kind of way of making money makes billions a year.

Daniel Snyder: Yes.

Austin Hankwitz: I mean, sure, it’s not a lot as a percent the revenue, but that’s billions of dollars. It’s interesting.

Daniel Snyder: Yeah. The shareholders are definitely going to be happy. All right. Let’s – oh, good day, Stephanie. We always love seeing you here in the chat with us. Of course, everyone just like Stephanie, jump in the chat. Let us know if you have questions. Let us know what you think about our analysis. If we’re right, if we’re wrong, we want to hear your opinions as well.

Now, as we get into the top of the show, obviously, let’s take a quick look at the markets. Shall we? Obviously, Fed meetings coming out, the FMC will drop here in just a little bit. Let me go ahead and share my screen. So, we get an eye update on the VIX and where the volatility index is.

Underneath that 28 level, the first standard deviation move that I always reference and should point out every week but look at this massive drop we’re seeing here. I mean, that’s all pretty similar to these previous drops that we’ve seen as well. If you always take the angle, we can take this and kind of move it over and see how it’s kind of panning out.

If this is going to pan out the same way that this prior move did, we’re going to see that gap fill down there. I still have it down there. I’m looking at it. Obviously, everybody’s calling for a rally through the end of the year. So, that’s something that I keep an eye on because the VIX is inverse correlated to the S&P, right?

So, let’s look at the SPA ETF for the S&P 500. Obviously, we’ve had to move up to the upside. I’m going to go ahead and remove this Fibonacci level right there, so we can see what we’re looking at here.

Now if you think this is the end of the move in the positive direction, all you can do is take the most recent low, draw it to the most recent top and that gives you kind of some targets to watch. For possible support levels, obviously, I like to follow the 38.2, the 50% and the 61.8% usually is a good retractive level to keep an eye on, which would take us all the way back down to 364 if this move is going to turn lower. If not, we can see some upside targets up here at the top – or the sorry, the bottom of this gap fill.

Look at how that level comes right to the bottom of that gap. Makes me think that the gap might turn as resistance, obviously, 80% of the time. Gaps do fill, but you never know what happens to that other 20%. So, something to keep an eye on there.

The quick tech sector, look, we are in a very big downturn. Let me go ahead and throw the – always forget to do this. I take them off for the volatility index because moving averages really don’t work on the volatility index, right?

Austin Hankwitz: No.

Daniel Snyder: Now when it comes to the market, look at this trend line. This trend line is holding so strongly. And I mean, that’s a long-term trend line. If we go to the weekly chart, you can see how this trend line comes all the way back to 2018, right? We saw a bump up against. And usually, once you break through a resistance level, it turns into support and that kind of looks like we’re – what we’re having going on here, but we’re also balancing around the 200 weekly moving average, which is something that the institutions definitely keep an eye on.

So, if we come back here into the daily levels, we can see that it’s trying to hold it as best as it can. We do have a gap above the market and the 200-day moving average is up here at 313. Quickly looking at IWM for the small caps, we still do have that gap beneath the market here. But more recently, we’re getting close to that 200-day moving average as well as the gap.

Look at that bounce right off the gap. This is why we pay attention to gas, guys. They like to bounce. They like to fill. Keep an eye on that as well. If that is the top of the move here, I can go ahead and do my quick Fibonacci retracement levels. 38.2% brings you down to the 50-day moving average. It’s weird how these things line up sometimes.

Austin Hankwitz: It’s so weird, man.

Daniel Snyder: Obviously, you got the 100-day here in green and the 20-day moving average down here, which is at the 50% Fibonacci level now, but that one moves the fastest. So, by the time we get down there, the 20-day might be up here closer to this 38.2% acting as a big support zone. And so that’s something to keep an eye on.

Austin Hankwitz: So, here’s a question I have for you, Daniel. If we – let’s jump back if you don’t mind sharing your screen again, back to the…

Daniel Snyder: Yeah, which one?

Austin Hankwitz: …to the S&P500. I’ve heard a lot online about something called a death cross. I’m not sure if you’re familiar with this technical analysis type verbiage. I’m learning from you every day. But I heard something about a death cross, which I think is like a moving average goes across another moving average and it’s just like a bad news bear situation. I don’t know if that’s happening right now with the S&P 500. I’ve seen some people call it out as a potential. Are you familiar with the term?

Daniel Snyder: Yeah. Let’s walk through it real quick. So, there’s two of them, right? There’s the gold cross and the death cross. And really what you’re talking about when you’re looking at those terms is really the 50-day moving average and the 200-day moving average. So, when the 50-day moving average like back here crosses over the 200, we call that a golden cross.

Why? Typically, prices continue to rise to the upside after that happens. You see a bounce along here, along the 50-day moving average as it rises to our – the peak that we had back in January. Now, you had the cross. The death cross was actually back here in March of this year, right?

Austin Hankwitz: Okay.

Daniel Snyder: So, when the 50-day crosses below the 200, that is the death cross scenario that you’re talking about. And obviously, everybody, I mean, these are Quant systems that are programmed to follow stuff like this, right?

Where once that moving average crosses over, establishes that it is a continuation of the pattern. Then that’s when you typically see more people coming in the market, Quant trading starts picking up in volume and they get their positions back on. But as of right now, we’ve been underneath the 200-day moving average since March of 2022 when that death cross did happen.

Austin Hankwitz: Got it. So, death cross has already happened. I’m reading some old news is what it sounds like. And now we’re just waiting. Who knows when that’s going to happen? But for that golden cross baby, give me the golden cross, Daniel, that’s what I want?

Daniel Snyder: Well, a lot of people are starting to say next year now, right? We’ve had people saying that we’re in another bear market rally, which might be the case. Obviously, recession fears are still there. Everybody’s waiting to see how Powell answers his questions today, and there’s a lot on the horizon for the docket here at 2 o’clock in two hours.

So, why don’t we enjoy this hour? Not think about that right now and continue into why don’t we – I want to ask you, before we get into bullish or bearish, with initial thoughts. What’s your take right now on all this Twitter (TWTR) stuff happening? Obviously, Elon came, he took over Twitter. He brought the sink in. Why? Get it – his jokes or whatever. But he also let go the CEO, the CFO. He fired the entire board. He is the sole board member now. What do you make of all what’s going on over there right now?

Austin Hankwitz: Imagine, like, just doing that, right? Imagine being a guy. It’s so funny. I saw a quote that was, like, make your money and then go to war, right? Make your money, make sure you’re good, and then, like, go to war against everyone that is just like the system, right? They want to break the system. And I think that’s what Elon’s doing at this point in his life. He’s in his 50s. The guy’s old. He’s Tesla’s (TSLA) cool, SpaceX’s cool, the Neuralink stuff. It’s all good.

He’s like, you know what? I’m on Twitter way too much. Let me just go to war and figure out what the heck is with the censorship stuff. Maybe something’s going on elsewhere within his mind about all this. But I think it’s wild. I think about just coming in. Having the audacity to say, I have a buyer company for $44 billion, and I’m going to fire everybody. I’m going to do it myself.

I did see that that a couple folks that I follow on Twitter, some from a16z, are helping him sort of with this, maybe even help him navigate this, right? Some of the brightest minds we were at increasing or doing this. So, I’m really excited about that.

But I think at the end of the day, like, I don’t think Elon has any ill will. I don’t think he’s doing this as a publicity stunt. I don’t think he’s doing this as a way to sway votes for the next presidential election or the mid, I don’t think that’s what any of this is. I think Elon is a smart guy who’s figured out that a lot of people use Twitter and that right now, just generally speaking, Twitter is not what he thinks it can be.

I’m not sure if you read the text messages between him and a bunch of other people about the blockchain ideas he has and he’s – we obviously saw about the Everything App with x.com.

Daniel Snyder: Yeah. The messages with Jack Dorsey came out.

Austin Hankwitz: Yeah.

Daniel Snyder: [It really shows] [ph]. That was crazy.

Austin Hankwitz: Yeah. Yeah, Jack was like he’s always supposed to have been a protocol idea. So, I’m excited, man. And I think what’s really interesting about this is I discovered this yesterday and this is not me like trying to plug anything, but I did see that Titan, which is a website that, like, I think it’s called a Robo Advisor. They partnered with Cathie Wood’s ARK Invest Venture Fund, which we all have words for Cathie Wood.

But somehow she got equity in privately purchase Twitter. So, for whatever reason now, people that invest in her fund are able to have exposure to private Twitter. Not sure if that’s anything anyone’s interested in, but I thought I’d call that out because I feel like there are some Elon, big heads around here. Yeah. It’s going to take, man. I think it’s interesting.

I do want to say though, I don’t know about this $3 hike with the Twitter Blue to $8, perhaps $20…

Daniel Snyder: Wait. Can we also recognize though that it was Steven King that pushed back on him originally?

Austin Hankwitz: Yeah. With the heck, dude.

Daniel Snyder: I mean, come on. Like, it’s brilliant though. I feel the exact same way. It’s like, dude, the blue check mark. Like, there’s people on Twitter that have hundreds of thousands of followers and are doing great without a blue check mark. Like, you don’t need the blue check mark, but it’s like, hey, if rich people want to pay $8 a month, let them.

Austin Hankwitz: Yeah. Totally. Totally.

Daniel Snyder: Doesn’t hurt anybody. I just love that where she’s, like, $20 a month. Here, I have it right here. $20 a month to keep my blue check. I’m not going to say what? But forget that. They should pay me. If that gets instituted, I’m gone, like, in ][indiscernible]. I mean, come on. I’m gone like in [indiscernible].

Austin Hankwitz: Hey buddy. [indiscernible] ought to be everyone was, like Twitter is getting the most activity right now of all the people – or no, Google (GOOG, GOOGL). They were saying Google servers are about to break because all the people who are trying to Google, who these celebrities leaving Twitter even are, right?

Daniel Snyder: No one cares. Like, just shut up and hang out on Twitter, man, like, I don’t know, whatever. But that’s interesting that you do bring that up. I mean, Sami puts out a good point, too. It’s like, yeah, there’s a bunch of people that helped Elon with the debt of this, right? Jack Dorsey even rolled over his $1 billion into this merger or this acquisition.

So, there’s a lot of people involved, but I think a lot of people just trust Elon in this sense. And obviously, also, like, you’re talking about, Elon really doesn’t care. Like, I don’t think he’s ill will and what he’s trying to do here. He’s just trying to find a way to produce enough revenue to keep the lights on and keep it functional.

Austin Hankwitz: Exactly.

Daniel Snyder: And especially since this is, like, his main way of marketing Tesla to the world.

Austin Hankwitz: Yeah.

Daniel Snyder: So, since Tesla doesn’t spend any money on marketing cost, this is where he’s done it and has worked out.

Austin Hankwitz: Absolutely. Absolutely.

Daniel Snyder: Interesting too. I wanted to bring up one other thing before we get into bullish or bearish, inflation. So, I don’t know about you. And maybe our viewers have this happening, too. If you really pay attention, I was in the grocery store the other day talking to a friend as well. I went to go buy my hair product, right? And I noticed that Old Spice had changed the amount of product that they put in the canister, so that they didn’t change the price, right?

And so I was – we were talking about how there’s the two different types of inflation, right? So, it’s, like, the inflation where you just raised the price and consumers start to freak out, oh my gosh, everything’s getting more expensive. And then there’s the inflation where they – the companies try to hide it, right? They try to say, oh, new marketing look. New look of a container. This is better for you. This is our new kind of vibe. Get into it and then you look at it and you’re going, hold on. But there’s 0.4 ounce is less for the same price, so you’re really taking product away from me. Are you seeing this as well with the stuff that you’re buying?

Austin Hankwitz: I am at one, Daniel, I’m really excited to know that we both use the same hair product. The Old Spice, the Putty. It’s the Pomade Putty. I mean, like, get out like, it’s perfect. And I agree, right? It went from this like tall kind of circular red can to now it’s like the smaller can, but it’s wider. It’s like I know what you guys…

Daniel Snyder: Can. Yeah.

Austin Hankwitz: Yeah. It’s like I see what y’all did here. I respect the husky, but on the same token, it’s like, I’m still trying to find the old cans on Amazon, right? I don’t like this, like, new crazy stuff. I’m trying to – yeah, I’ve seen it, man. I’ve seen it. And…

Daniel Snyder: I agree with you Vida, stinkflation – shrinkflation. Sorry, shrinkflation. That’s a great, great word for it.

Denise is here with us again. Denise is good to see you here again in the chat. When there’s breaking news, the first place everyone goes is to Twitter, the people at the event who are posting their videos and their first-person accounts are much better than the big TV news stations. I could not agree with you more.

Austin Hankwitz: Yes.

Daniel Snyder: Right. I could not agree with you more. And that’s where we definitely need Twitter. So, with that being said, we’ve taken too much time. Let’s go ahead and get into bullish or bearish initial thoughts.

Why don’t you go ahead and kick us off this week?

Austin Hankwitz: I’ll kick us off. Absolutely. So, ARK Invest Venture Fund, Daniel, is up a 100% over the last month. After these text messages between Elon and Jack Dorsey and all these cool people, mentioned Dogecoin potentially being some sort of form of payment to share tweets and Twitter turns into this blockchain of sorts. Dogecoin, is it cool? Is it not cool? What are your first thoughts on this as some sort of idea?

Daniel Snyder: Man, my initial thoughts are I’m not a fan of Dogecoin. I was just – I forget if I was listening or I was reading it, but, like, there’s something like 5 billion new Dogecoins created every year or something like that. Like, how are you not devaluing your money by owning Dogecoin?

Like, I get that the transfer protocol that it has apparently is really good and really efficient. It can process a bunch of transactions quickly, a lot faster than Ethereum and some of these other coins, these protocols. But if we’re supposed to use it for a long amount of time, doesn’t it just continue to do devalue the money that we have, or the words that I guess, you know?

Austin Hankwitz: Yeah. Not what you’re saying, right? It’s just – it comes down to and for those that are listening that might not know that cryptocurrencies do this. Well, so Bitcoin, right? There’s only so many Bitcoin that’s ever going to be created. So, much what the Federal Reserve did. Last year, they just printed more money, right? Bitcoin can’t do that. And that’s why it’s like inherently valuable in some people’s mind.

Other protocols can do that, right? Dogecoin is one of them, I suppose. And it’s a way to dilute the shareholders, right? So, I’m sort of in the same boat. I don’t think Dogecoin is going to be adopted. And everyone’s going to be paying a $0.01 to tweed and things. I don’t think that’s going to be the case.

Daniel Snyder: Yeah.

Austin Hankwitz: I do think that the technology, if it’s the protocol, if it’s the idea of transactions per second or whatever’s going on over there could be adopted and that could be reflected in the price of Dogecoin. But to your point, I don’t own Dogecoin. I’m not over here, loading the bags on Dogecoin. I think it’s cool. I congratulate all the people who saw that 100% increase over the last month. But then today…

Daniel Snyder: Well, good for them, but I’m – overall, man, I am bearish on Dogecoin. And actually, since you brought it up…

Austin Hankwitz: Yeah, bearish. Okay.

Daniel Snyder: Since you brought it up, I do have to mention here on November 15th at 2 PM Eastern, Seeking Alpha is having an exclusive webinar event. Remember last week, I was telling you I was reading the book by Omid Malcolm.

Austin Hankwitz: Yeah. Yeah. Yeah.

Daniel Snyder: The adjunct professor, so we got him to come on. He’s coming off for Seeking Alpha members to answer all the questions he’s laying out an entire framework of how to analyze cryptocurrency protocols and projects and coins before you invest and trade into it. So, obviously, all the messaging for that will come out here in the next two weeks, but November 15th. Just want to tell everybody right now before we get…

Austin Hankwitz: That’s huge.

Daniel Snyder: …to keep things going. Yeah, man, it’s going to be awesome.

Austin Hankwitz: I got to join that one. I guess before we jump on here, I’ll jump off to our next question while we’re selling Crypto. Stephanie is asking about Chainlink. I think if you remember, Daniel, that was the [Cross Talk]

Daniel Snyder: Yeah. That’s one year, right?

Austin Hankwitz: So, long story short for those of you that aren’t familiar, we all have, like, real world data, and then we have blockchain data smart contracts, these sort of financial ledgers of moving money back and forth. And what Chainlink tries to do is take this in real life data and put it on the blockchain to solidify it for the rest of eternity.

And so they do this by using something called an oracle where at the end of the day it’s just a voting system. If 40 people out of 45 people vote, that’s something actually happened in real life, then it will be transferred onto the blockchain as data and Chainlink is the one pioneering that. Big believer in it.

I think it’s awesome. They were just at Cyprus [ph]. I think that was over in Amsterdam with Swift and all their whole their payments thing, they just talked about, what is it? I’m trying to think it’s the derivatives, big derivatives contracts coming up with the actual banks. It’s interesting stuff. Go take a look at your super nerd like myself.

But moving on to our next question, Daniel. On the same subject of this, we talked a little bit about this $8 a month thing, right? Who’s going to pay $8 a month? Is it actually going to drive revenues? They’re going to keep the lights on? Right now, Twitter Blue, I think it’s like $3.50 or something, is doing $400 million a year in revenue-ish. That’s what I found in their reports.

But $400 million a year. Do you think that we’re going to see this $8 or perhaps even 20 comes just 8? This $8 subscription be a needle mover? Is this actually going to be able to add to our bottom line at Twitter? Or is it just going to kind of be like $400 million to $600 million, sure $200 million, but they’re spending so much on R&D. Like, are we really going to see some profits from this? Or is this just kind of like a way to quickly make some money?

Daniel Snyder: Well, I think, first off, we had to recognize that we might not ever see the profits because now it’s a private company, right?

Austin Hankwitz: Right, right.

Daniel Snyder: But I think overall, I think overall, that Twitter will find a way to get a specific user base out of this $8 a month subscription policy removing the ads. I think if there’s going to be something that he does, right,? There’s going to be some sort of Elon thing that he goes, if you pay the $8 a month, we’re going to give you access to something that no one else’s have, and it’s going to be a great product.

And I mean, look, the guy’s got a great history in coding. He’s got a great history of finding the next who knew hot hip thing and really blowing it up. I mean, the dude can sell freaking perfume or cologne that smells like burnt hair. Like, are you kidding me? He can sell anything? He sells flamethrowers. He sells all those crazy to [indiscernible], the whistle. What is it? The Cybertruck whistle?

I mean, the dude’s like, hey, let me do this and then he doesn’t need – he’s a massive hit. I think he has a good following that even if it’s just his following that buys into it, I think people will buy into it. And like we were talking about, it’s going to help keep the lights on over Twitter.

Austin Hankwitz: Got it. Got it. So, now we’re just going to switch gears completely to not Twitter-related, Johnson & Johnson. They just paid $16.6 billion to acquire a heart pump company, right, medical devices. And they’re doing this as a last ditch effort to reenergize their medical device sales, medical device business rather. Is this money well spent, $16.6 billion? For perspective, this company that they just acquired, they bought them at 16 times 2023’s expected revenue.

Daniel Snyder: Wow. All right. So, for full disclosure, I don’t know much about this deal. I did see it come through the headlines.

Austin Hankwitz: Sure.

Daniel Snyder: Obviously, you’re bigger into healthcare and you might be able to speak better on this. But overall, J&J, I think, has been a phenomenal company historically. Of course, that doesn’t guarantee. It’s going to continue to be, especially with all the opioid lawsuits and everything else that were going on the baby powder and, I mean, they’ve hit a lot of walls, right?

But when it comes to health, we got to remember we’re pretty much willing. Most people are willing to pay almost anything for continuing life or improving life or fixing the problems that they have with their body. So, 16 times ‘23 earnings. That is – I mean, that’s a long, long-term play, right?

Like, they are going to have to be able to I don’t know. I think if anyone can do it, maybe they can. But like I said, I’m not really sure. Full disclosure. I just don’t know much about the whole deal and the sector.

Austin Hankwitz: Makes a lot of sense. Yeah. I think at the end of the day, for me too and again, so next year, the company that they just acquired for $16.6 billion will do about $250 million in net income and about $1.1 billion in revenue, right? So, about 16 times revenue.

And to me, to justify a deal of this caliber and not this valuation, especially in the sort of market that we’re trading in right now, there must be a lot of synergies, right? There must be a ton of synergies across what’s Johnson & Johnson’s existing medical device business segment is. I did hear though that, Johnson & Johnson is spinning off sort of their consumer. Segmented a little something different. I think it’s the Tylenol and Band-Aid stuff versus this medical device business segment.

I think I read that they that the device sales segment today sells prosthetic knees, what’s it called your contact lenses, things of that nature. But at the end of the day, I just – there’s got to be synergies, right? You got – it looks like you’re deep in thought right now reading some headlines.

Daniel Snyder: I’m looking at – so I’m pulling it up on Seeking Alpha here. I’m just kind of curious, like, why would you pay – why would you offer a 50% premium?

Austin Hankwitz: Yeah.

Daniel Snyder: Like, why would they, like, was – did they know that there would be competition and they were just kind of, like, I don’t want to deal with competing bids. I’m just going to go in high and make sure that we close this thing.

Austin Hankwitz: Perhaps, right, perhaps that would make some sense. But I think still at the end of the day, it’s good to remember that despite the macroeconomic environments, healthcare companies are very resilient, right? We’ve seen this with UnitedHealth Group. We’ve seen this with Humana and other MCOs.

I would imagine that that maybe was a card in the back pocket that this company was able to really lean into. Say that we know our revenue was expected to increase. Our profits are expected to increase. We perhaps even have a backlog, right? I think that that could have been a big factor in the steel closing.

Daniel Snyder: You know, how much it was stocked to be the one analyst on Wall Street that had a strong sell on that stock? I was like, man, there’s one analyst with a strong sell, and everybody else has a hold and a strong buy. And then that one lonely man, that’s going to be a hard oh, that’s like we’re going to have a roughly – they’re going to have roughly. All right. Cool. Good take.

Let me go ahead and dive into this first one for you. Obviously, GDP numbers came out. The advanced number was 2.6% red hot for Q3. What’s your take on this? Is this because we just had the two quarters of negative prints, right? So, what’s your take? You’re bullish or bearish on the overall economy? Are we going to stay positive? Or are we going back negative?

Austin Hankwitz: I am bearish on the overall economy, and I think I even saw that early Q4 prints were showing for GDP was like above 3% or estimates rather were above 3% like something absurd – absurdly high rather.

I’m generally bearish on the economy right now. I think that we are beginning to see the ripple effects of increased interest rates impacting businesses, impacting employers, employees, people who are carrying a lot of intra credit card debt.

I’ve seen a lot of people even friends and family saying, I was going to go do this thing for $4,000, $6,000, $7,000, $8,000, on my credit card because it was an emergency for me, but I’m now reconsidering because my credit card interest rates are above 34%, right? This wasn’t the case to a year ago.

Back then, they were 18%, 19%, 22%, right? So, I’m – I just – I feel like we’re coming to a breaking point or we will come to a breaking point likely in the next six to nine months in my humble opinion that will really begin to have us take a step back and say, wow, interest rates really did slow down the economy. A lot of people, if it’s unemployment, if it’s credit default, I don’t know what that kind of breaking point is that red flashing light, but I think we’ll begin to see a lot more of them here in the coming quarters.

Daniel Snyder: Oh, for sure. I mean, look, the big thing that happened was during 2020, when interest rates got cut down to 0, every company, smart CFO in the world said, let’s go raise a lot of money at these low rates. And so what we’re doing now is just kind of dwindling the path out and so those companies are like, oh, if we need to re-raise, the interest rate’s a lot higher. And I think that’s when we’re going to start to see because we haven’t seen the unemployment numbers really, like, tick up, like they’re supposed, like, everybody’s expecting.

Austin Hankwitz: Exactly. Exactly.

Daniel Snyder: And so it’s because I think these companies were smart enough to raise so much cash when cash was cheap. And they just kind of been, like, playing it out a little bit more, letting the new revenues come in and seeing how far they can go to hopefully make it all the way through this recession if there is one, right?

Austin Hankwitz: Absolutely. I will say, too, before we jump to the next one, though, it’s – and this is not even anything cool or fundamental. It’s just an observation on my Facebook (META), right? You kind of rewind a year ago. I’ve seen all of these people might – I bought a house. I’m buying houses. I’m flipping the Airbnb’s (ABNB). I’m doing the arbitrage. I’m doing this. I’m doing that. I haven’t seen a single one in the last three months, right?

And I don’t know if that’s everyone who needed houses, bought the houses, or if it’s just the fact that interest rates are really high right now and those monthly payments are much higher. I can’t afford them anymore. I don’t know what’s going on. But I do have a lot of friends in the mid to late-20s and early 30s who a year ago rather where house, house, house and are today very like, oh, man, I’m just kind of play a cool go to pass out Halloween candy at my apartment, right?

Daniel Snyder: Oh, man. Yeah. And actually Sami’s over here in the chat. The worst day in economic downturn is the best day to buy stocks. The question is, how to know this is the worst day.

Now, Sami, I will say the one thing to keep in mind also is that the stock market typically bottoms before the overall economy does. So, I think personally, I love watching the bond market, right? The bond market is one of the biggest markets out there and they have the power to move via their money flows.

So, I like to see the bond market stabilize with all these – I mean, you see it every day, right? The two-year treasury yield, the 10-year, the 30-year. All these yields are just too volatile right now. And until we get some stability in the bond market and then start seeing the economic numbers, also sort of start to go in the direction that everybody’s anticipating then I think the overall macro if we’re taking the overall macro approach of looking into stocks, that’s when I would start to think, okay. We might start to see a little bit of a bond process here.

But anything can happen, right? Bonds are signaling QT for the next 12 months, right? Bonds are – yeah, we’re still very much in a Quantitative tiny cycle. And especially, I don’t know if you saw this. The treasury just announced the other day, they’re raising another $150 billion. That was a surprise to the market, right? And so that just means that the Fed has to do more work. So, the QT is not going to stop anytime soon, my friends.

All right. Moving on to this next one. So, we’ll make this one quick because we talk about airlines all the time, but I don’t know if you saw this. On Monday of this week, Delta (DAL) pilots voted overwhelmingly in favor of strike authorization, it was a 99% approval on a 96% participation level. So, the stock is now back to levels not seen since February of 2014 unless you count the COVID dip that the entire market did.

So, I’m wondering, holidays are coming up, airline travel still needed, cargoes – airplane cargo moves goods around the country just as well. Should we be worrying more about this with the unionization and the lack of agreements happening with the – within the airline space? Are you bullish or bearish on that?

Austin Hankwitz: Definitely bearish of all time on airlines, right? Just like you know to what you said, we’ve talked about that a lot. But I will say that and this is something beyond just airlines that I’ve begun to notice over the last six to nine months, really just here in 2022, is I feel like a lot of people, a lot of employees are beginning to stand up for themselves and beginning to say, I don’t like doing these things, especially since it was not in my job description. I’m not being paid extra for it. I’ve got all these extra responsibilities.

And sure that translates very differently between airlines, pilots, and people like you and I who are in the workforce or different things of that nature. But I think this is a big shift. I mean, we just saw the pay transparency get passed in New York. And I think this is a big shift for employees in general.

I think over the next, call it, 12, 24, 36 months, we’re going to see a lot of employees kind of stand up for themselves. And if that is unionizing, if that’s striking, whatever that is, I think that’s going to be a trend here in the next couple of years. So, bearish on airlines, but bullish on paid transparency.

Daniel Snyder: That’s a wild thing to think about, right? Because, like, the economy used to be heavily unionized and then it slowly dismantled. Now it’s like we’re going back into that cycle, almost. It’s a little interesting.

I just want to ask everybody that’s here with us. Are you guys planning to travel via airplane over the next, like, month or two. I mean, during the holiday season, everybody has their travel plans, right, typically. So, just kind of curious. I mean, imagine the disruption that would happen. if there was a strike call during the holidays from airline pilots. Think about that.

Like, especially with I mean, airlines are like one of the backbones of our economy. So, definitely worrying. I travel twice a year. Travel is awesome, says Sami. Richard says, yes. Stephanie is not traveling. George, yes, but not Delta. Robert says, yes, heading to Turks and Caicos. Take me to Caicos [Cross Talk]

Austin Hankwitz: Oh, Robert live here. Where is he going [Cross Talk]?

Daniel Snyder: He’s going on vacation this week. Yes. Yes. Next week, dreading any disruption and loss of luggage, Vida says, oh, hey, losing luggage of those guys.

All right. Last one up on the table for you. Shopify’s (SHOP) CEO, Tobias Lütke, disclosed on Monday that he bought nearly $10 million worth of stock of his company stock in the open market for the second time this year. Bullish or bearish on Shopify?

Austin Hankwitz: So, I have – I know Shopify just reported their earnings last week. I did not read anything about them. But I did see the stock popped off. I think you said the CEO’s name is Tobi. I think I follow him on Twitter, right?

Daniel Snyder: Tobias. Tobias.

Austin Hankwitz: Tobias, I’m sorry. I have always had a understanding and conviction for Shopify. I think it’s very much needed. I view Shopify time and time again. I’ve been a Shopify customer. I was a Shopify customer when I launched this T-shirt company I had when I was in high school, right? I was paying the $29 a month and selling T-shirts online. It was a blast.

I think Shopify is the backbone of and I think this is in their data, too. They’re the second largest, I think, behind Amazon (AMZN), e-commerce, sell them everything behind Walmart (WMT), I’m not sure, but they’re the top three e-commerce seller in the United States. And I think they’re the backbone for a lot of small businesses. I think they’re the backbone for a lot of medium-sized businesses. And obviously, the backbone for a lot of publicly traded businesses. We see that in their Investor Relations deck.

I have full conviction in their management team to execute upon these ideas, these growth levers, these strategies over the coming several years. Whatever they even be a blind conviction in these people because they’ve done such a good job over the years. And I’ve followed Tobias over on Twitter for a while. Very smart man. Very, very, very smart man. Good for him.

Yeah. I’m bullish on Shopify. I think the stock price is even down, something like 75% or 85% since recent all-time highs. So, perhaps, something we don’t know. But here’s what I always say, we talked about this in the Wallstreet.

Daniel Snyder: Well, that’s just based off of the surge, let’s stay at home, right? Like, everybody was staying at home. Everybody was selling everything digitally. So, I think that’s why everybody saw Shopify overextend on valuation.

Austin Hankwitz: That would make sense. Yeah. That would make sense And I think just to round this off, people sell stock is the executives insiders, right? They sell stock for any reason, right, to go buy a house to pay off their cards in the midst of college, but they only buy stock for one reason. That’s to make money if the stock price goes up. I look way more into people who buy stock and people who sell it and up the CEOs doubling down buying millions and millions of dollars’ worth, I think that’s something to be aware of.

Daniel Snyder: Yeah. It’s always something that I like to take note of. Beta over here asks, are they running on a lot of debt right now? I’m just pulling up the most recent quarters says on their balance sheet, the debt was $1.3 billion, but they have $4.94 billion in cash. So, no, it doesn’t really look like it, but it’s…

Austin Hankwitz: Yeah, obviously, probably not.

Daniel Snyder: It’s definitely an interesting one. All right. Cool. Bullish or bearish, humbly? Now, I just want to remind everyone before we dive into – we’re going to play guess this stock because I think everybody loves that. If you have any stock ideas that you want us to break into the analysis and do all the research for you and present it to you here on Stock Market Live, email us at stockmarketlive at seekingalpha.com, and we will tally those up. And we – I mean, we have a list. We have no shortage, but we’re always looking for new ones.

So, all right, let’s get into guess the stock. If you think you know what this is, jump into the chat and let us know. So, kicking it off. This Fortune 500 industrial stock was founded in 1925 when Holt Manufacturing Company merged with the C.L. Best Tractor Company. This company is the primary servicer for all major North American railroads, meaning they were responsible for over 100,000 miles of rail.

This company’s product became influential during World War I, and it actually inspired the design of the British tank. We have one guess already over here in the chat. Anybody else? You might recognize the company’s products today due to them being painted a bright yellow color, but they were originally gray and it wasn’t until 1931 that they decided to make the change. Does anybody know? Not Deere (DE), Robert. No.

I think we got a good idea here. They did this nice privately messaged only us, so that everybody want to see it. Ah, that it all is. All right. Caterpillar Incorporated (NYSE:CAT). Congratulations, guys. Well done. Well done.

Caterpillar Incorporated is the stock that we’re diving into today. Ticker symbol, CAT. Awesome. Why don’t you go ahead and give us a nice fundamental look into the company?

Austin Hankwitz: Let’s do it. So, in this, we’re going to talk about the business briefly. I think everyone’s pretty well aware of what they do and what they sell and perhaps even how they make money. But we’re also going to kind of touch on what happened, what their growth story was a little bit in 2021, what it’s shaping up to be like in 2022. If that momentum can continue in 2023, some big takeaways from the recent earnings call and then like just my thoughts.

So, taking things off, right, Caterpillar manufacturers and sells construction and mining equipment, diesel and natural gas engines and industrial turbines worldwide. Quite literally, if you’ve seen this like big, yellow, orangey looking machine, moving big rocks or doing something massive, it’s probably their machine, right? They have this iconic color.

They’ve been in business for nearly a century and have customers virtually all around the world. They have over 300 products in their catalog and 4 million CAT products are at job sites every day around the world. That’s crazy to me. Millions, right? They sell these products through an independent dealer network. They have a 160 dealers and 2,400 facilities worldwide.

The average tenure of each dealer is actually 52 years, which means that CAT is not only focused on selling their products, but keeping their dealers happy along the way. This company makes money in two different ways. The first is sort of obvious, right? They sell these massive machines, and that represents 95% of their annual revenue.

But the second is genius, in my opinion. And it’s offering financing on these machines, right? So, in 2021, the ME&T, Machinery, Energy and Transportation business segment raked in $48.2 billion, while their financial products business segment made them another $2.8 billion, on top of that for a total of $51 billion in revenue. This was up from $41.7 billion in 2020, but down from $53.8 billion in 2019.

So, now looking toward 2022, Wall Street is expecting CAT to produce $58.1 billion in revenue, an increase of 14%, and this will likely translate into a bump in net income of about 22% to $7.2 billion. This momentum is assumed to continue in 2023, with Wall Street estimating a 6% bump in revenue, right, $61 billion and a 4% bump in profits of about $7.5 billion.

But I have questions, right? Why did they see so much momentum from a stock price and from an earnings perspective in 2022? Was it pent-up demand? Was it something larger? And is this really going to continue into 2023 considering the current macro environment? And more importantly, what does this mean for their 30-year long dividend streak if you’re an investor.

So, starting with this 2021 idea, this was sort of like an obvious play in my opinion, right? Home and building – or home and building construction was just starting to see some intense momentum, which was fueled by those ultra-low interest rates. We talked about my friends all buying houses, right? They were built from scratch by somebody and had to use some machines.

Mine development outlook was improving with better pricing on precious metals, and they were even hearing some rumblings, right, of this $1 trillion infrastructure bill that was signed into law earlier this year. Something to also mention about 2021 was the U.S. dollar was relatively weak and considering that 60% of CAT’s revenue was generated outside of the United States. This was good for the company’s bottom line.

As we headed into 2022, we saw the company implement price increases as well as begin to see the positive effects of operating leverage mainly due to the company being able to offset those looming supply chain constraints and the higher than expected inflation-driven costs. This was a major reason why their operating cash flow increased beyond those pre-pandemic highs.

So, now as I look toward 2023, a few things are sticking out to me that might impact this company. The first one is the macroeconomic environment, right? We have pesky high inflation and the Federal Reserve is continuing to hike interest rates.

The question I asked myself about this specific scenarios, how is this going to impact construction and new builds going forward if it’s especially now harder to borrow large amounts of money, right? Does that impact CAT? A author here on Seeking Alpha named Leo brought some awesome points to the table. He shared that the U.S. economy is on the brink of a recession. The European economy is doing much worse. Chinese construction demand is slowing, and the U.S. ISM Manufacturing Index is also plummeting and expected to fall below 50. The macro isn’t looking too great.

The next one is increased sales momentum that could be catalyzed by both those price increases and a heightened demand from customers. So, this is something I’m looking at because I like the idea of this, like, double growth continuing into 2023, right? More demand and higher prices. That’s extra money.

However, the company is sitting also on a $30 billion worth of backlog that they need to execute on. So, demand’s there and just need to execute, get the revenue, and run with it. So, the demand side of the equation is likely to remain high in 2023.

However, as the company shared with us in their recent earnings call, the expectation for non-residential construction is what they hope will fuel that momentum, right? We obviously know residential construction demand has plummeted since interest rates go up, but these non-residential construction seems to be moving – continuing to move in the right direction, and this could be supported by government-related infrastructure investments.

So, here are my three big takeaways from their recent earnings call. The first, just like idea, if you guys didn’t read it yet is that they did a really good job, right? Their ME&T operating profit was $2.3 billion. It was up 45% year-over-year on only a 22% revenue gain, leaning back into that double growth idea that we talked about before, right, higher prices and higher demand. Despite ME&T operating margin likely to fall short of their targets on Investor Day, trends are improving. They’re finally back to pre-pandemic levels.

Their management team even shared with us that the company is seeing a big boost in new equipment orders for their solar turbines. Solar services revenue is expected to remain steady and should actually see a sizable push in Q4. But some risk to consider now that their earnings is out is the EAME region or the Europe, Africa, Middle East region is 25% of sales and they’re expecting to be flat to negative in 2023, right?

So, a quarter of their sales are going to stay the same or even come back down. Residential construction is also 25% of construction revenue or about $6.5 billion of annual sales, which is expected to decrease substantially and 2023 do those interest rates.

And finally, their dealer inventories went up $700 million between Q2 and Q3 of this year, where you compare that to a $300 million decrease during the same time last year, nothing to be alarmed about, but higher inventories is interesting to keep an eye on.

So, at the end of the day, here’s what I’m thinking about the company. And Daniel, I would – I want your thoughts, man, because I’m kind of torn, but I am leaving on one side of this. The company is going to book about 15% revenue growth in 2022 and we’ll see probably high single-digit growth in 2023. This will catalyze maybe a high single-digit dividend growth in the near-term next year or two and share buybacks.

But if the company is able to really deliver on these high-end margin guidance, which they shared in their Investor Day, I think it’s unlikely, but again, who knows? This would obviously drive higher earnings power potentially of sending their stock price higher next year. But the question is, how much higher, right?

I’m going to be honest. I think that CAT is priced to perfection. Beyond maybe a 7% to 10% dividend hike, I’m not sure if there’s like this big, true conviction of a story to that that’s going to run the stock price up higher into next year. I like the idea of finally having these pre-pandemic margins again and the opportunity for those margins to potentially expand in 2023, this might drive 2023 earnings per share up to like $16 or something.

But the company’s stock price seems to be trading and likes to trade in this $180, $220 range. And it’s hard to believe that it’s going to trade higher out of this range assuming a global recession, assuming this impacts their customers in a negative way, all things of that nature.

So, from my perspective, Daniel and everyone else listening here, it’s a hold. I’m not over here, smashing the buy button. I think we missed the vote. I think the story of increasing demand and margin expansion about 12 to 18 months ago was the story. And they accomplished that, which is why their stock price move in the right direction.

Sure. They might continue to ride that wave, but I think a lot of that upside has already baked into the current stock price and their valuation. That is my take. That is CAT, and love to open the floor up for discussion.

Daniel Snyder: Yeah, man. No, that was phenomenal job. First off, I want to get into the chat here. Sami says, CAT also make smartphones powered by Android 2, So, they have a phone segment. They also have an apparel segment, where they license the Caterpillar name to these people that are making the products. However, it’s not that much of their revenue, right?

So, it’s kind of like, yeah, they do it, but they do it because they have the name. X-ray, sorry if I’m saying your name wrong, but diesel issues may create a bearish environment. Yeah, they make a lot of diesel engines, right? They’re making the – they’re not producing the diesel. They’re making the equipment that utilizes diesel. So, something to keep in mind on that front.

Skip says doesn’t the strong dollar weekend CAT’s huge international business. Skip emphasized the word huge, which is Titan.

Austin Hankwitz: Yes. [Cross Talk]

Daniel Snyder: Yes. Obviously, and I actually have – I have a little metric on that for you as well here in a second. Stephanie says, CAT’s debt is huge. This will be an issue with rising interest rate. So, yeah, they do have a lot of debt. However, I think the company is positioned in a way to be able to handle that debt, and we’ll get into that here in a second.

And Vida says, I noticed the Quant is listed as a strong buy for CAT. Yes, it is. And that was one of the things that I was like, oh, is this – I mean, this is a strong buy today, Austin. Even with the price having jumped, hold on…

Austin Hankwitz: That was wild.

Daniel Snyder: 30 – was it 36% in a month? Like, the price – the share prices jumped tremendously. It was rising increasingly. I mean, the earnings was only, like, a 10% jump or something like that.

Austin Hankwitz: This is Quant buy.

Daniel Snyder: But the Seeking Alpha Quant rating still has a strong buy on this stock even after this massive move. So, that is something that I do take into consideration.

Josh, let’s go ahead and go to the first chart just so Austin can kind of explain a little bit what we’re looking at here because you sent this up.

Austin Hankwitz: Oh, yeah, this is just the ISM Manufacturing Index, right? So, this is just doing folks. Obviously, you can see as, like, when we’re looking here at the sort of the start of 2021, manufacturing was abundant, right? We had shut things down because of COVID, but now we’re ramping manufacturing backups. We saw a big spike up and even a peak there around 65, and now we’re not exactly seeing that type of momentum anymore.

And that goes into obviously what’s these big machines are doing if it’s construction, manufacturing like, that’s their bread and butter. So, it’s interesting to note that and just show people kind of how things have slowed down since about a year ago.

Daniel Snyder: Yeah. Couldn’t agree more. I’m glad you brought that forward. I mean, obviously, it’s in the downtrend, right? Everybody sees that. So, we’re definitely keeping an eye on that 50 number. So, below 50 means, that the economy is in contraction; above 50 means, we’re in expansion. Just make sure everybody’s aware of that.

Josh, let’s go ahead and go to the next slide. We’re going to go and run through the ratings summary on Caterpillar. So, the Seeking Alpha authors are a hold…

Austin Hankwitz: I have no idea it was a Quant. I’m so [indiscernible] the way right now.

Daniel Snyder: Yeah, man, Wall Street does a buy on the stock and the Quant system is a strong buy. And, like, not just, like, barely into the strong buy category.

Austin Hankwitz: That is a deep strong buy.

Daniel Snyder: 4.85, and that’s out of 5. So, it’s pretty much it’s 0.15. I mean, like, it is a strong buy by the Quant. Something interesting.

Let’s go to the Factor Grades, next slide, Josh. I can break it down. So, the valuation is a D+. I mean, if you break it down is the price to book of the stock is like, three or four times what it probably should be, which, I mean, can be a couple of different factors of things. But if we go into it, I don’t think I hold it for you guys. Sorry about that.

But the enterprise value to EBITDA forward looking is about 14 times right now, when the overall sector of industrials is roughly 10.5 times. So, that’s one of the things that you’re seeing why the valuation grade is a D+. But not to mention not too long ago, the valuation grade was actually a C-, as you see there three months ago. So, it kind of teetered – looks like it teetered back and forth, but it’s got strong profitability, right? A+ across the board there for the three months and six months historically.

Let’s go ahead and go to the next slide, Josh. I went ahead and looked at the analyst breakdown. Majority of Wall Street seems to be a hold on the stock with 15 analysts saying that Caterpillar is a hold at this time. There’s 12 recommending buy, 2 recommending strong sell, and that’s within the last 90 days.

And then for Seeking Alpha authors in the last 30 days, we have everybody kind of groups here in the middle, right? So, two of our Seeking Alpha authors say, it’s a hold; three say, it’s a buy; and two say, it’s a sell at this time.

All right. So, let’s get into Caterpillar. What’s my take? Obviously, you laid out the very well thought out valuation metrics of what’s going on with their earnings and how they had the big prize in the last 12 to 18 months was huge for the company.

Let’s go ahead and go to the next slide, Josh, so we can show. This is from their most recent earnings report. Obviously, sales revenue up, profit per share is up, operating margins is up, all the things that you were talking about.

And go to the next slide because I think you briefly mentioned on the dividend, right? And the dividend is something I usually look at. So, obviously, this company is a dividend aristocrat because not only has it paid this dividend, I think it’s for 33 years now if I have that right. It has raised the dividend for 29 years. And the payout ratio for this is only 36%. I believe I have the dividend grades.

Let’s go ahead and go to the next slide, Josh, is so people can see it. So, here’s the Dividend Grades from Seeking Alpha. The dividend’s safe, man. The payout ratio is down to 36%. The five-year growth rate is 8.3%. Traditionally beating inflation has been a pretty solid stock to be in and hold on to.

Annual payout for the year ahead is expected to be $4.80. The consistency is there. I mean, if you’re a dividend player, you love stocks like this. Now do you buy all at once? No. Of course, you scale in over time. You get your cost base – your cost base is down. But just interesting to think about is, they pay a brilliant dividend.

Actually, go back to the previous slide, Josh, because I want to break this down. So, you see there in the middle where it says return to shareholders in the third quarter of $2 billion. How did they do that? Well, only $600 million of that was actually the dividend. The other $1.4 billion of that was then buying back common stock.

And so what I did is I went into the financial documents. I was like, what is going on here? They had been buying back stock for as long as it can be. Back in 2012, let’s see what was it. The treasury stock for the company was roughly $10 billion of value, okay?

So, in 10 years, they’ve increased that from $10 billion to $30 billion by taking back over a 100 million shares of stock taking it off of the market. So, you think about that’s some serious revenue that they’re making in order to do that. So, their share – what’s the outstanding share? I think it’s like 130 million shares out in the open market today.

Now, the interesting thing about this stock. Josh, go ahead and take the slides off for me. I’m going to go ahead and go to the chart. Let’s take a look at it because you’re going to see some pretty big price moves within this chart, okay? And why is that?

If there’s 530-something million shares of stock, the thing about Caterpillar when it comes to the market internals of the company is sure, you have all the stock, but the volume traded. I mean, even today, the volume traded is only 762,000 shares. And on a daily average right now, I think it’s $2.8 million.

So, why is that? Where is Caterpillar’s stock? Well, because this company is so great, because it’s a stock that’s in the Dow Jones Index, it’s in the S&P 500. It’s in the Dividend Aristocrat. All these themed ETFs had bought up Caterpillar stock.

Oh, here’s one, XLI. The XLI industrial ETF is 3.64% of that ETF, right? Caterpillar stock is so locked up and that’s why you can see these massive price swings that we’ve been seeing. Now this is pretty interesting to me. Let’s go ahead and zoom in here. Obviously, here’s the earnings call we were talking about. I went ahead and drew the gap. There’s so many gaps on this chart, man…

Austin Hankwitz: Oh, yeah. Oh, yeah.

Daniel Snyder: …and that’s always hard for me to see. Let me reset our moving averages as well just so everybody can get an idea where those are at. So, let’s look at it. I mean, there is a huge gap down here. We filled it most recently right before this earnings. I’m going to go ahead and take that off to not confuse anybody.

Gap here was filled, gap, here was filled, gap, here was filled, great. All the gaps are up here, and that’s what I’m looking at now when it comes to the gap field technical side of things. Obviously, I’m watching the moving averages. The 20-day is straight up like a rocket because of the earnings and the move recently.

What am I expecting here? I’m watching this down trend line, right? So, obviously, resistance, resistance. If it breaks through, and it could become support, which is something that I would like to see. But in the meantime, I would expect we might be a little overextended in the range if you’re looking to create an entry now.

So, that’s something I do want to point out to people. Obviously, the gaps below here need to fill, in my opinion. And this could come back down to the 200-day moving average. You see that right there at the bottom of the gap. That’s a level that excites me. It’s 198. But honestly, I think if we get down to the 180s, 190s, that would be a more attractive level for the near-term because of the recession fears that we have on the horizon, right, like you were talking about, in the Forex, the strong dollar. Where’s my stat, I told you guys I had on the on the Forex.

So, because of the strong dollar, they just said in their last earnings call, when converting sales in foreign currencies to dollars, Caterpillar sales fell by $461 million. Just gone, right? Because you had to convert all of your international sales back to you as well. $461 million that they lost because of the strong dollar. Crazy.

Obviously, like you mentioned, there’s a lot of slowdown in residential, construction. But the thing I think I like about Caterpillar a lot is they’re within – they’re big in the mining industry, right? And if we’re talking about there’s a big transitioning happening for creating batteries to be used in EV vehicles, and that’s still a big push by our government in the world, I mean, there’s obviously going to be a lot of need for this Caterpillar’s products. They’re going to need to be able to excavate the earth and get everything moved out. I mean, they have probably some of the best equipment.

And I also like how you mentioned about the financing the Caterpillar company does. However, not – in addition to financing the product, they also offer the ability to ensure the product with them directly. So, they have all these different arms that they’re getting a hold of. So, even if we do enter into a recession, ensure the stock share price might pull back a little bit, I think in the long-term, I really like this company.

Austin Hankwitz: I agree with you. No [Cross Talk]

Daniel Snyder: I really like this company, man.

Austin Hankwitz: And I think…

Daniel Snyder: What about you, guys? Everybody listening. Real quick, I just want to see if anybody wants to jump in the chat. Do you guys like Caterpillar at these levels? I mean, do you like it as a company? Let us know what you think in the chat. I would love to see what you guys think.

Austin Hankwitz: Most definitely. And I think what it was for me, right? It’s like, there was a lot of good things needed to happen to justify this $220, $225 share price, right? Now when we begin to kind of think back about those $195s, $180, like, now we’re getting more exciting, right? This makes a lot more sense.

But when we’re trading at valuations 20%, 30%, 35% higher than these perfect entries, that’s from, like, okay, where’s the upside, right? Because I think of a lot of Wall Street’s price targets as well assuming, 16 – or I think actually the consensus is around 14.50 earnings per share next year.

But assuming even margin expansion, things that nature be coming around $15.5, $16, right, that lands us around this 200-ish, $30 price target, which is kind of where we were yesterday, the day before. So, I definitely am on the boat of get excited about CAT as the price begins to come back down to reality. It seems like a buying opportunity, absolutely.

Daniel Snyder: Yeah. I do…

Austin Hankwitz: Not financial advice though. Want to remind everybody, not financial advice.

Daniel Snyder: Just our opinions, everybody. Just our opinions. So, Jorge over here says, yes, as a company and business, point to consider is the entry point, which as we talk about all the time, entry point and what’s your time horizon, right? But a great dividend paying stock. Keep that in mind. X-ray says way too volatile, watch out. Denise up here says a lot of buybacks before the federal government potentially puts a tax on the shares.

Yeah, we’ve been watching that as well. Take 5% to 7% off the closing price and then do a limited buy and send it a good to cancel and enjoy the dividends. Funny point. Then we have Christian down here. The Biden Infrastructure Bill may help to offset the – what is that, the fall in residential home building. Martin Marietta, aggregate company, said as much today. Good point as well.

Yeah. I mean, look, the hard thing for Caterpillar is the massive amounts of their international sales, right? Like, that’s what boils down to. You pointed out the Europe, Africa, Middle East, segment is getting hit hard. However, I did look at the numbers in the most recent 8-K report of Latin America is turning around, right?

So, Latin America is starting to see. I mean – and they have a lot of resources. It might be the mining segment. And then also there’s the energy segment, right? Like, Caterpillar is used for building out new oil wells and LNG pipelines. Like, they’re used…

Austin Hankwitz: The solar turbines.

Daniel Snyder: Yeah. They’re used everywhere, and that’s what I think I like a lot about them. It’s like, I can see into the future 10 years from now, this still being a very relevant company that is needed especially, like, our infrastructure in the United States needs so much work. Like, if you even look at just how I mentioned in the beginning, the 100,000 miles of railroad line. Like, our railroad is massively outdated and needs a lot of help and maybe Caterpillar is going to have a long runway just from that revenue source alone. So, when you think about the…

Austin Hankwitz: Do you have the $30 billion backlog? It’s a thing. Absolutely.

Daniel Snyder: I think they’re well positioned for the long run. It’s kind of hard for me to get in right here at 2.17 a share. I don’t own any shares. I mean, 10 years ago, the company was at $80 a share if you’re just looking strictly at price. I mean, obviously, they’ve come a long way in 10 years, but we’ve also seen a lot of free money as we all know. We’ve seen the massive bull market that we had.

If this recession hits, if it hits the states, then it could be a solid 12, 18 months of struggles, but I won’t tell. And that’s Caterpillar, guys. That is Caterpillar stock.

Austin Hankwitz: Most definitely I don’t remember, Daniel. On with Caterpillar, were they – I’m – maybe we were back, call it, like, five or six years ago under Trump. Did they see a push there between – oh, that’s what it was, yeah, yeah, yeah, yeah. You start with that 20 – sort of early 2016, that’s why their stock went nearly vertical between 2016 and mid-2017. Everything Trump was doing to with the infrastructure and things that needed during his presidency. That, yeah, that makes a lot of sense. I thought that it happened.

Daniel Snyder: I want to say congratulations, ex Ray [ph], who’s in at CAT at about $1.15 share.

Austin Hankwitz: Nice.

Daniel Snyder: That’s a solid entry. Congratulations. I’m a little jealous. I’m not going to lie. I’m a little jealous on that because Caterpillar, like, you’ve been sitting at 1.15 plus the dividend. So, Nice. All right. All right. Anything else, Austin?

Thank you so much, everybody, for hanging out with us today. This is Caterpillar stock. Obviously, I hope you enjoyed it. Let us know what you think, comments, subscribe, ratings, reviews, the whole thing. If you’re watching the replay, if you’re listening to the podcast, join us live sometime, Wednesday’s 12:00 to 1:00 PM Eastern Time. Austin, what else you got going on? I mean, obviously…

Austin Hankwitz: Yeah, I got to let the people know. I got to let the people know. I’ve got a Seeking Alpha profile, going to hit the follow button for your boy Austin on Seeking Alpha. I’ve also launched a marketplace. So, if you enjoy deep dive fundamental analysis, we’re talking about cash flow, we’re talking about dividend, we’re talking about all the fun stuff. Like, that’s up your alley, click the follow button. Join the Marketplace. There’s a free trial for two weeks. If you don’t like it..

Daniel Snyder: What’s the Marketplace called?

Austin Hankwitz: The Cash Flow Freaks.

Daniel Snyder: Yeah, here you go.

Austin Hankwitz: The Cash Flow Freaks. The freaks are focused on cash flow dividends, all the fun stuff. Give us a follow, join the group. We really appreciate it, and thanks so much, everyone. Skip, Stephanie, Jorge, be the extra great cold. Thanks to all for hanging out with us.

Daniel Snyder: Yeah. We love [indiscernible].

Austin Hankwitz: Follow us on Twitter. Maybe we’ll get verified one day on Twitter, [Cross Talk].

Daniel Snyder: Oh, my gosh. They’re not paying for that. But recommend your stocks to a Stock Market Live at seekingalpha.com. We love all you, guys. Don’t lose your money due to this FOMC meeting. Austin, you didn’t put your calls this time? Because I remember the last one.

Austin Hankwitz: I haven’t put it.

Daniel Snyder: All right. Let’s go front run them. All right, Josh. Let’s get out of here, man.