Today's matchup is Caterpillar (NYSE: CAT) vs. Deere (NYSE: DE). Using five short-of-scientific-but-carefully chosen criteria, let's determine which is the better buy according to the numbers:
Round 1: Cheapness
Advantage: Deere. Cheapness is determined by P/E ratio. The lower the better. Be careful of earnings near zero that skew the ratio, one-time gains and losses, and pasts that aren’t indicative of futures (the more dynamic the industry, the more this is true).
Round 2: Growth
Advantage: Deere. Growth here is the trailing 5-year EPS growth rate. This trailing earnings growth helps put notoriously optimistic Wall Street projections in perspective.
Round 3: Operations
Advantage: Deere. Net margins shows the percentage of revenue that hits the bottom line. The more similar the business models, the more relevant the comparison.
Round 4: Balance sheet
Advantage: Deere. As with net margins, the debt-to-capital ratio is most relevant in comparing companies in similar industries. In this battle we give the nod to the lower-debt company, but attention should also be paid to the cost of debt, interest coverage ratios, and the stability of the business (the more stable a company’s operations, the more debt it can safely carry).
Round 5: CAPS rating
Advantage: Deere. A company’s CAPS rating is our community’s opinion of the stock. Deere has a slightly greater numerical CAPS rating than Caterpillar (even though they have the same number of stars). You can get more information on your stocks -- and our community’s opinions of those stocks -- by clicking over to CAPS.
Each of these five rankings need more context -- like, how these companies stack up against key competitors such as CNH Global (NYSE: CNH) and Illinois Tool Works (NYSE: ITW). But these basic numbers suggest that Deere is a better buy. What do you think? Let us know in the comments section below.
Tuesday, December 1, 2009
Top Takes from Real Money
The RealMoney contributors are in the business of trading and investing all day on the basis of ongoing news flow. Below, we offer the top five ideas that RealMoney contributors posted today and how they played those ideas.
TheStreet.com brings you the news all day, and with RealMoney's "Columnist Conversation," you can see how the pros are playing it on a real-time basis. Here are the top five ideas played today. To see all that RealMoney offers, click here for a free trial. 1. Markets Today
By Marc Chandler
7:52 a.m. EST
Global equity markets are higher as concerns about Dubai World continue to recede after Dubai indicated the loan package being negotiated will be about half the size ($26 billion) originally expected. That and the softer yen helped boost the Nikkei 2.4% and bring total gains since Friday's Dubai-induced drop to 5.4%.
Elsewhere, consumer and technology shares led China, Hong Kong and South Korean bourses higher. European bourses are up, with PMI manufacturing data helping boost industrials, which together with financials are lifting the DAX and CAC by about 2% in morning trading.
The FTSE 100 is up 1.7% helped by basic materials and financials while early indications suggest U.S. markets will open higher. Today's developments have not helped UAE equity markets, which are still down, falling 3.6% to 6.4% today.
No positions.
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2. Potash Price Target Increased
9:54 a.m. EST
Fertilizer stocks are sharply higher today on a price upgrade for Potash (POT Quote). I've been bullish on fertilizer for over a year now as the economics of the businesses look very compelling going forward: You can defer but you cannot avoid fertilizer application. After loading up a couple of years ago, farmers are nearing inventory depletion, which means they will buy at market prices. Second, more people plus less arable land equals more fertilizer needed to feed them. And the best part is that names like POT, Mosaic (MOS Quote), Agrium (AGU Quote) and CF Industries (CF Quote) are quality blue-chip-type companies that are quite cheap on a forward-looking basis.
3. Gold
By Timothy Collins
12:12 p.m. EST I'm taking a small position in the December 119 puts on the SPDR Gold Trust (GLD Quote) for $3.25 or better. GLD has become very extended from its 20- and 50-day moving averages, and I don't expect gold to plummet, but I suspect a short-term pullback from this $1,200 level may happen. I wouldn't expect GLD to go below $112.50, but that area is my target for a pullback.
Short GLD via puts.
TheStreet.com brings you the news all day, and with RealMoney's "Columnist Conversation," you can see how the pros are playing it on a real-time basis. Here are the top five ideas played today. To see all that RealMoney offers, click here for a free trial. 1. Markets Today
By Marc Chandler
7:52 a.m. EST
Global equity markets are higher as concerns about Dubai World continue to recede after Dubai indicated the loan package being negotiated will be about half the size ($26 billion) originally expected. That and the softer yen helped boost the Nikkei 2.4% and bring total gains since Friday's Dubai-induced drop to 5.4%.
Elsewhere, consumer and technology shares led China, Hong Kong and South Korean bourses higher. European bourses are up, with PMI manufacturing data helping boost industrials, which together with financials are lifting the DAX and CAC by about 2% in morning trading.
The FTSE 100 is up 1.7% helped by basic materials and financials while early indications suggest U.S. markets will open higher. Today's developments have not helped UAE equity markets, which are still down, falling 3.6% to 6.4% today.
No positions.
--------------------------------------------------------------------------------
2. Potash Price Target Increased
9:54 a.m. EST
Fertilizer stocks are sharply higher today on a price upgrade for Potash (POT Quote). I've been bullish on fertilizer for over a year now as the economics of the businesses look very compelling going forward: You can defer but you cannot avoid fertilizer application. After loading up a couple of years ago, farmers are nearing inventory depletion, which means they will buy at market prices. Second, more people plus less arable land equals more fertilizer needed to feed them. And the best part is that names like POT, Mosaic (MOS Quote), Agrium (AGU Quote) and CF Industries (CF Quote) are quality blue-chip-type companies that are quite cheap on a forward-looking basis.
3. Gold
By Timothy Collins
12:12 p.m. EST I'm taking a small position in the December 119 puts on the SPDR Gold Trust (GLD Quote) for $3.25 or better. GLD has become very extended from its 20- and 50-day moving averages, and I don't expect gold to plummet, but I suspect a short-term pullback from this $1,200 level may happen. I wouldn't expect GLD to go below $112.50, but that area is my target for a pullback.
Short GLD via puts.
Fertilizer War Rages: CF, Terra, Agrium
NEW YORK (TheStreet) -- CF Industries(CF Quote) said Tuesday that its investment bank, Morgan Stanley(MS Quote), will extend the deadline on its acquisition financing to Dec. 31, as the fertilizer maker continues to pursue its hostile takeover bid for rival Terra Industries(TRA Quote).
The extension on the funding, previously set to expire Nov. 30, was expected. Deerfield, Ill.-based CF, which successfully pushed three sympathetic directors onto Terra's board last month, has faced a defiant Terra. For its part, Terra, of Sioux City, Iowa, has refused to negotiate with its suitor, at least until CF brings a better price to the table. The Morgan Stanley financing comprises a $2.5 billion loan, which would cover more than 78% of the cash portion of CF's current offer. The bid calls for CF to pay $32 in cash and 0.1034 CF shares for each of the 99.83 million Terra shares outstanding.
CF continued in its attempt to apply pressure to Terra, saying in the press release announcing the extension that "it does not have any right to extend the financing commitments beyond December 31 unless a merger agreement with Terra is signed by that date."
Also in the press release, CF's chief executive, Stephen Wilson, said the vote at Terra's annual meeting signaled that its shareholders "want a sale of Terra in the near term and that the price we have offered forms the basis for final negotiations." He went on, "This has been confirmed to us in recent conversations with Terra stockholders. We are committed to moving forward with the acquisition of Terra."
The extension on the funding, previously set to expire Nov. 30, was expected. Deerfield, Ill.-based CF, which successfully pushed three sympathetic directors onto Terra's board last month, has faced a defiant Terra. For its part, Terra, of Sioux City, Iowa, has refused to negotiate with its suitor, at least until CF brings a better price to the table. The Morgan Stanley financing comprises a $2.5 billion loan, which would cover more than 78% of the cash portion of CF's current offer. The bid calls for CF to pay $32 in cash and 0.1034 CF shares for each of the 99.83 million Terra shares outstanding.
CF continued in its attempt to apply pressure to Terra, saying in the press release announcing the extension that "it does not have any right to extend the financing commitments beyond December 31 unless a merger agreement with Terra is signed by that date."
Also in the press release, CF's chief executive, Stephen Wilson, said the vote at Terra's annual meeting signaled that its shareholders "want a sale of Terra in the near term and that the price we have offered forms the basis for final negotiations." He went on, "This has been confirmed to us in recent conversations with Terra stockholders. We are committed to moving forward with the acquisition of Terra."
Materials Stocks Moving the Markets Higher
International Paper, Newmont Mining, Allegheny Technologies and U.S. Steel are clustered at the top of the S&P materials sector which is leading the broader markets higher after the open. The entire sector is up 1.3% versus 0.9% for the S&P 500 as a whole. The materials universe seems to be benefiting a bit from a bit of weakness in the U.S. greenback.
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