Saturday, April 30, 2011

Caterpillar and Komatsu - Two juicy morsels

No matter what corporate mining website you turn to, one thing won`t go away from the pictures there. Yes, it`s the CAT logo branded on all those trucks, excavators and specialized heavy machinery.

With the commodity boom and mining operations heavily intensifying cross the world, Caterpillar is best positioned to take advantaged of such momentum. Everyone in the world is buying their highly professional machines as there are not many alternatives to what they can offer. Even Chinese companies are buying their high tech machinery.

Mining operations are expected to grow at an accelerated pace across the world within the next 5-10 years, as signs of heavy demand are already sparkling everywhere.
CAT not only has recovered from the 2008 economic crisis but their shares are worth more now than back in 2008. This is truly amazing. There aren`t many that can boast such achievement. It goes to show the momentum this company has and the future potential. 

Caterpillar 2008 vs 2011

Japanese rival Komatsu(PINK:KMTUY) has also been a good performer on par with Caterpillar. It could provide an interesting alternative. As you can see in next chart, Komatsu has been performing on par with CAT, even outperforming here and there. For the sake of comparison, I`ve also added a Chinese rival that recently managed to equip themselves with some capable technology. Xiangtan Electric Manufacturing Group (XEMC), ticker 600416 listed in Shanghai.

XEMC(yellow) vs Caterpillar(red) vs Komatsu(blue)

Worth noting that the Chinese XEMC has been a strong performer for the past 5 years. During the past year, however, Caterpillar and Komatsu performed better.

All these 3 can prove to be good choices. Caterpillar offers, over the other two, a larger market, bigger diversification of customer base and could provide best stable growth. The other two, however, are serious contenders and could provide some very pleasant surprises down the road.

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