Large Cap Machinery Jumps, But Small Cap Machinery Offers the Real Value
Caterpillar Inc. (CAT) and Deere & Co. (DE) were the ringleaders of the rally from the construction and farming machinery rally on Monday... the day's biggest gainers with a market-weighted bullish move of 3.5%.
The pop was a pre-emptive buy in front of what was supposed to be good news from Alcoa Inc. (AA) Alcoa sent a mixed message after the market closed though.... higher revenues, but short on profit estimates.
That in itself isn't going to drop a nuclear bomb on Deer & Co. and Caterpillar Inc. come Tuesday. But, considering both were technically overbought and both were overvalued (by most measures) compared to their smaller peers, investors would be well served to finally acknowledge the other, smaller names in the group.
In terms of outright P/E ratio, Joy Global Inc. (JOYG) is the cheapest with a P/E of 13.5. The projected PEG ratio contest is won by Alamo Group Inc. (ALG) with a 1.23. Revenue growth (yoy) was strongest for Bucyrus International Inc. (BUCY), as was earnings growth.
The only categories that Deere and Caterpillar led were market cap, and as of Monday afternoon, most overbought.
The Alcoa idea is right.... evidence of a strengthening economy will help this industry's stocks. It's just that investors focused on the two least opportune names. Think small.
