Why Caterpillar Is Losing to the Dow in 2012

The following video is part of our "Motley Fool Conversations" series, in which industrials editor/analyst Brendan Byrnes discusses topics from across the investing world.

Today, Brendan takes a look at Caterpillar, which has had quite the roller-coaster ride thus far in 2012. The stock started the year strong and was the Dow's second-biggest gainer for the first few months of 2012, outperforming the blue chip index by over 20% at one point. But since then, the stock has cratered, now down 3% versus the Dow's 5% gain. 

The global economy is the main reason for Caterpillar's fall -- it's a cyclical stock and one of the most sensitive on the Dow to the macro economy. It also didn't help that rival Joy Global reported a drop in mining-equipment demand in its most recent quarter. Caterpillar recently made a big bet on the mining segment through its largest acquisition ever: Bucyrus International. But in the video below, Brendan explains why he thinks that mining will still be a strong driver of growth going forward, and views Caterpillar's recent dip as a great buying oportunity.

While Caterpillar looks like a long-term winner especially at this valuation, we've uncovered a different stock that we're even more excited about. This stock has so much promise that we've dubbed it "The Motley Fool's Top Stock for 2012." In this free report, our chief investment officer identifies his favorite company for the year. To access the report before the rest of the market catches on, click here -- it's absolutely free.

Brendan Byrnes owns shares of Caterpillar. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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