Out Fox The $treet

Before the open, Caterpillar (CAT) reported monthly sales figures. The data continues to support that this cycle is peaking.

The New Dogs of the Dow had a solid Q1 gain that surpassed the benchmark Dow. The average stock in the Net Payout Yields based list had a yield of 9.2% to start Q2. Due to a large buyback, United Technologies overtook the lead with the highest yield at 13.1%. This article will focus on the quarterly returns and changes in the new "Dogs of the Dow" strategy originally introduced (see  The New Dogs Of The Dow - 2015 ) last January. The goal of the series is to highlight that the old theory of buying the Dow stocks with the highest dividend yields is outdated. The more modern version involves using the Net Payout Yield (NPY) that adds the net stock buyback yield to the dividend yield. This yield more accurately reflects the modern corporate structure that utilizes a large amount of stock buybacks. Read the full article on Seeking Alpha.  Disclosure: Long AAPL, CAT, IBM, TRV. Please read the disclaimer page for more details.

The New Dogs of the Dow had substantial Q3 losses similar to the benchmark Dow. The average stock in the Net Payout Yields based list has a yield of 9.1% to start Q4. Even after a small gain in Q3, Travelers continues to top the list with a 12.1% yield. This article will focus on the quarterly returns and changes in the new "Dogs of the Dow" strategy originally introduced (see The New Dogs Of The Dow - 2015 ) back in January. The goal of the series is to highlight that the old theory of buying the Dow stocks with the highest dividend yields is outdated. The more modern version involves using the Net Payout Yield (NPY) that adds the net stock buyback yield to the dividend yield. This yield more accurately reflects the modern corporate structure that utilizes a large amount of stock buybacks. Read the full article on Seeking Alpha. Disclosure: Long AAPL, CAT, IBM, TRV. Please review the disclosure page for more details....

Summary The New Dogs of the Dow had Q2 returns that exceeded the gains of the DJIA, but it failed to match the rebound of the Dogs of Dow theory. The average stock in the Net Payout Yields based list has a yield of 8.3% starting Q3. After a large loss in Q2, Travelers tops the list with a 12.3% yield.    This article will focus on the quarterly returns and changes in the new "Dogs of the Dow" strategy originally introduced (see The New Dogs Of The Dow - 2015 ) back in January. The goal of the series is to highlight that the old theory of buying the Dow stocks with the highest dividend yields is outdated. The more modern version involves using the Net Payout Yield (NPY) that adds the net stock buyback yield to the dividend yield. This yield more accurately reflects the modern corporate structure that utilizes a large amount of stock buybacks. Read the full article on Seeking Alpha .   Disclosure: Long AAPL, CAT, IBM, T...

Summary Caterpillar reported Q1 2015 earnings that smashed analyst estimates. The company continues to face a tough environment for construction and mining equipment. The stock offers some of the highest net payout yields in the market, providing a catalyst for a stock trading near multi-year lows. Ultimately, the market didn't respond too well to the quarterly results of Caterpillar (NYSE: CAT ) . Despite a huge beat , the stock actually traded slightly down in a positive market. While investors fret over the future orders for mining equipment, the yields are too attractive to ignore. Read the full article at Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Small-Cap Insight A year after originally writing about the key margin improvements expected at Terex Corporation ( TEX ) , the amounts are still a future expectation. In fact, back in 2009 the company originally presented the expectations that operating margins would increase to 12% by 2013. The number though still languishes around 6% on a yearly basis. The company remains a leader in the manufacturer of machinery and industrial equipment focused on aerial work platforms ( AWP ), construction, cranes, material handling and port solutions (MHPS), and materials processing segments. Read the full article at Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

In the Q4 earnings release, Terex (NYSE: TEX ) announced the goals of earning $5 in 2015. Considering the company just reported a year of achieving $1.83, the natural question is whether the company can legitimately grow earnings that fast over the next 3 years. The company is a diversified global manufacturer of equipment focused on aerial work platforms, construction, cranes, material handling and port solutions, and materials processing. With more » Disclosure: Long TEX. Please review the disclaimer page for more details. 

Manitowoc Company Inc. (MTW) closed out last week trading at the 6-month high levels of $15. While the market envisions the company as a crane manufacturer that competes with Terex Corporation (TEX) , it currently obtains higher operating income from the food service division. The company currently has a mark cap of $2B and only trades at 5x the trailing twelve months EBITDA of nearly $400M. With limited operating margins in the crane division, the company has yet to see any rebound from the global financial crisis. The company faces similar margin issues as Terex in comparison to a mega-cap like Caterpillar (CAT) . In the last few months, a shift is occurring as stocks focused more on construction equipment have performed better than ones with mining exposure. Read the full article at Seeking Alpha. Disclosure: Long MTW and TEX. Please review the disclaimer page for more details. 

Westport Innovations, Inc. (WPRT) remains a leading way to invest in the transition to natural gas as a transportation fuel. As previously noted, the market is no longer impressed with the growth rate of this once market darling. The company expects to benefit greatly from the building of the natural gas highway by Clean Energy Fuels (CLNE) and a new engine from the Cummins Inc. (CMI) joint venture, though in both situations the catalyst remains months away. The company is a global supplier of proprietary solutions that allow engines to operate on clean-burning fuels such as compressed natural gas (CNG), liquefied natural gas (LNG), hydrogen, and renewable natural gas (RNG) fuels. Prior to the recent quarterly report, Westport dropped revenue expectations for 2012 from greater than 50% growth to a still strong 30% growth rate. These reduced numbers, while remaining strong, unfortunately point to higher than expected losses into 2013. All signs point to a strong future as US and Chin...

The poor man's Caterpillar Inc. (CAT) appears to have finally turned the corner. Terex Corporation (TEX) continues to report solid margin expansion even with limited sales growth. In the past, the company routinely reported substantially lower margins than the market leader even in high growth periods. The company is a diversified global manufacturer focused on aerial work platforms, construction, cranes, material handling and port solutions, and materials processing. While investors might have been disappointed with lower than expected sales during Q3, the more important number remains the solid margin expansion. Generating free cash flow and improving the balance sheet is more important than growing revenue. Read the full article at Seeking Alpha. Disclosure: Long TEX and MTW. Please review the disclaimer page for more details. 

Last week, the market presented some major signs of the beginning stage of a recovery in the construction sector. First, railroad shipments of lumber and crushed stone increased dramatically. Second, PPG Industries (PPG) reported blowout earnings in part due to a recovery in the US construction market. While most construction related stocks have already had a run, most are no where near multi year highs. Several options exist for playing the construction recovery. The main debate is whether to focus on US based companies that will benefit solely from the rebound in US construction or globally based companies that will benefit from the largest two economies (US and China) rebounding at the same time. Read the full article at Seeking Alpha. Disclosure: Long ANR, FCX, SHLD, and TEX. Please review the disclaimer page for more details. 

Joy Global (JOY) plunged 10.8% today after reporting Q4 earnings and 2012 guidance that apparently weren't pleasing to investors. Not sure I understand the disappointment with the numbers. It appears that JOY forecasted solid numbers for next year. Maybe expectations were too high, but that seems odd considering the European debt crisis. Sure management discussed demand concerns, but they were clear that destocking of copper and coal in China and India were basically over. Also, mining companies are better positioned to finance mining projects this time as compared to 2008. Not to mention that companies learned the hard way what happens when long term projects get delayed for a small term economic downturn. Honestly, what is the logic of delaying a copper mine expected to open in 2013 due to macro economic issues now? Supply remains weak in the commodities sector and it is clear that emerging market demand is nowhere close to peaking. Has anybody seen the lack of infrastructur...

On Saturday, Dow (DOW) and Saudi Aramco signed the Joint Venture agreement to create Sadara Chemical company. Sadara will be a $20B project comprised of 26 manufacturing untis, several of which constitute "mega projects". The complex will be one of the largest integrated chemical facilities and the largest ever built in one single phase.  The plan is for the facility to take advantage of the cheap feedstock from Aramco and combine that with DOWs chemical expertise. Also, it will take advantage of cheap labor in Saudia Arabia.  This project was originally discussed in 2007, but eventually delayed due to the financial crisis.  It should be a boon for Engineering & Construction companies such as Flour (FLR) and possibly other like Jacob's Engineering (JEC) and Foster Wheeler (FWLT). FLR already has $1.9B contract for connecting all the utilities for the complex, but all companies in the sector will benefit as the project soaks up industry capacity.  ...

This is the third in a series of articles on the performance of stock sectors since the financial crisis. The first article focused on  steel producers  while the second article was on  women's apparel . As with the first two articles, the goal is review a sector where stock prices remain drastically depressed from highs seen prior to the financial crisis back in 2006-2008. In some cases, this might be a sign that the sector was just overvalued back then and hence the current price is deserved. In other cases, this might signal that the sector has plenty of room for recovery especially if the global economy gets over the current soft patch. Read the full article at Seeking Alpha .  Disclosure: Long FWLT in client and personal accounts. Please review the disclaimer page for more details. This information is provided for informational purposes and should not be relied upon as investment advice. 

The worldwide crane market was crushed during the financial crisis and still hadn't recovered as 2010 ended, even though several industrial and mining equipment manufacturers have already recovered to pre financial crisis levels such as Caterpillar ( CAT ), Joy Global ( JOYG ) and Bucyrus ( BUCY ). Fortunately for U.S.-based crane makers, Q1 2011 saw a surge in orders and finally signals of a market recovery. Both Manitowoc ( MTW ) and Terex ( TEX ) saw huge backlog increases in the crane segment. MTW had a nearly 40% increase in backlog to $800M from the $572M reported at December 31st. TEX had a 30% increase in backlog and like MTW saw plenty of demand in North America. The total went from $774M to $1,004M. Read the full article at Seeking Alpha . Disclosure: Long TEX in client and personal accounts. Please read the disclaimer page. 

It appears that Terex (TEX) has finally turned the corner. Up till now, TEX has remained one of the few companies to not turn around from the 2008 financial crisis. Sure TEX had clearly bottomed out, but after selling their mining equipment business to Bucyrus (BUCY) it left them with a construction heavy product portfolio that continued to remain weak. The Q1 earnings report finally showed a turn in the cycle as opposed to the bottoming process of the last 6-9 months. Sure the backlog had increased over the last few quarters, but this time TEX reported a 30%+ QoQ increase in all 4 segments: AWP, Construction, Cranes, and Materials Processing. AWP had a whopping 45% sequential increase and a 123% increase over last year. Cranes which accounts for over 60% of the total backlog saw a surprising turnaround with a 30% sequential increase while down on the year. Backlog has trended from a low of $1.12B in Q210, $1.223B in Q310, $1.3B in Q410, to $1.79B in Q111. The trend has now become ...

Incredible news from Vale (VALE) the leading iron ore producer in the world located in Brazil. VALE plans to double capital  spending int 2011 to $24B in order to diversify away from iron ore and into pricier metals and fertilizers. This is nearly a doubling from the $12.9B planned for 2010. Who will benefit from the increased spending? Naturally companies like Joy Global (JOYG), Bucyrus (BUCY), and Caterpillar (CAT) could see improved orders. Terex (TEX) could see some orders for its new port crane business as well. What's interesting is that a large portion of the increase will go towards logistics building of expanding rail capacity and ports. Maybe that explains why CAT recently expanded its rail engine exposure. One of the major focuses of the spending will be on fertilizers. Goals include doubling phosphate rock output and quadrupling potash production by 2015. Coal production will also nearly quadruple with just about every area nearly doubling. As far as VALE, its n...

Catching up on trading from yesterday. Trimmed half our position in Caterpillar (CAT) in the Net Payout Yield Portfolio after a weak reaction to a positive earnings report. Also after the huge run and the lack of a buyback implemented by CAT leaves the NPY at only 2.4%. This is not significant enough for this portfolio so discipline requires us to sell. CAT has been a long term holding of the portfolio, but the gains in the stock and the limited payouts suggest the stock may be topping. Not to mention the negative action in the stock from bullish earnings. From the chart, its apparent that at least the short term action is negative.

A private research firm names Sageworks published a report today picked up by Reuters showing that private firms increased building in May by a whopping 4.6%. It was significantly higher then the gains in March and April and let to the first 3 month increase in 6 months. Our great government was reporting construction numbers from April today. Aren't they efficient. Those construction numbers showed a larger then expected increase, but this report from Sageworks is even more bullish. One caveat though is that I know very little about the accuracy of this report or its history. Its a very bullish data point for CAT, MTW, and TEX. It also shows how the naysayers have been so wrong about this rally. The momentum just continues to feed on itself. The stock market goes up so more people buy stuff, then more stuff needs to be built, then the government reports turn out bullish, then the stock market goes up. This pattern continues until the Fed makes monetary changes to slow down the gr...