It should surprise exactly no one that Caterpillar
Turns out, the view is ever-so-slightly bullish. Let's have a look at a few of the key sentiment drivers.
1. Analyst opinion
Analysts like Caterpillar. Data from Capital IQ captures their collective feeling:
| Opinion | Number of Analysts |
|---|---|
| Buy | 9 |
| Outperform | 6 |
| Hold | 8 |
| Underperform | 0 |
| Sell | 0 |
| No Opinion | 3 |
Fifteen analysts have either a "buy" rating or an "outperform" on the stock -- the majority sentiment. A good portion (eight) of the analyst crowd deems the stock a neutral "hold," but there's not a single "sell," so we'll classify analyst sentiment as bullish.
2. Insider buying
Next we'll look at insider buying and selling. Over the past year, Caterpillar insiders have sold $17.5 million worth of their company stock. During the same time period, insiders bought $297,140 in Caterpillar shares. (Data from Form4Oracle.)
It'd be nice to see more insider buying to balance out the selling, but it's important to remember that insiders sell stock for a whole host of reasons -- to pay for a house or tuition, to diversify assets, and so forth. Also, for a company with a $69 billion market cap, $17.2 million of net selling isn't all that meaningful. For purposes of this exercise, we'll classify insider buying/selling as neutral.
3. Guru buying
Next, we'll look at "guru" ownership of the stock, according to GuruFocus.
In the quarter ended Dec. 31, three gurus traded Caterpillar -- two buyers (Mario Gabelli and George Soros) and a seller (Richard Aster). In the previous quarter, the trend was more bearish, with the only two gurus making trades in the stock choosing to sell Caterpillar.
For the overall picture, we'll classify guru sentiment as neutral.
4. Retail investor community sentiment
For retail investor community sentiment, I turn to Motley Fool CAPS, our proprietary stock rating system. CAPS generates ratings on a one- to five-star scale, with five stars as the highest ranking, indicating that the Fool community believes in a stock's future. Caterpillar gets a bullish four-star rating.
5. Short-sellers
Next we'll look at whether short-sellers are circling the stock. There are 14 million Caterpillar shares sold short, according to Capital IQ. As a percentage of shares outstanding, that's a short interest of 2.2%. That's not very high, and so for determining sentiment, we'll classify the low short interest as bullish.
6. Does Buffett own it?
This is the "cherry on top" test, and in this case, it's a no: Berkshire Hathaway does not own shares of Caterpillar.
Adding it up
The consensus opinion on Caterpillar is slightly bullish. Analysts and the CAPS community have a favorable outlook on the stock, and in another positive sign, short-sellers are staying away. Gurus and insiders present a more neutral picture, and the company fails just one test -- Berkshire doesn't own shares.
Of course, you can't base an investment philosophy on who likes or dislikes the stock you own, and even a consensus bullish opinion can sometimes be a scary thing. Quoting Buffett: "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful."
The purpose of this series of articles isn't to make a definitive buy-or-sell call on Caterpillar. Rather, by looking at a stock's sentiment, the goal is to help you place your own opinion of it in a broader context.
One final thing: If you want to keep tabs on Caterpillar's movements, and for more analysis on the company, make sure you add it to your Watchlist.
