Einhorn Goes Short On Caterpillar

In the heat of American politics, many have reacted to government activity with brash investments, thus launching certain market shares to deceptively high values. One of the fortunate — though temporary — benefactors of this trend is Caterpillar Inc. CAT, which the founder of Greenlight Capital evaluated Tuesday as overpriced.

In his general newsletter, David Einhorn advised shorting Caterpillar along with certain industry peers whose values surged after the election.

“Every time someone says ‘infrastructure investment,’ investors reflexively buy certain stocks including CAT,” the hedge fund manager wrote. “Yes, CAT sells machines that are used in infrastructure, but this represents only a small part of its business.”

Einhorn pointed out that Caterpillar’s largest segments are mining and energy — two areas with no perceived room for growth. Considering these factors, he said the company is overpriced.

This assessment is in line with Einhorn’s presentation from May 2016, when he expected Caterpillar revenue to fall and the coal industry to undergo bankruptcy.

At the time, he said he didn’t think Caterpillar would “hit bottom” until 2018, at which point it would reach an anticipated $2 annual EPS.

The stock recently traded at $93.77, down 0.75 percent on the day.

Peer Deere & Company DE appeared to move in sympathy when news first hit, recently trading at $104.91, down 0.8 percent.