Image Source:   Linked here is a detailed quantitative analysis of  (). Below are some highlights from the above linked analysis:Company Description: Caterpillar Inc. is the world’s largest producer of earthmoving equipment, and a major manufacturer of mining equipment, electric power generators, and engines used in petroleum markets. In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:1. Avg. High Yield Price 2. 20-Year DCF Price 3. Avg. P/E Price 4. Graham NumberCAT is trading at a premium to all four valuations above. When also considering the NPV MMA Differential, the stock is trading at a 160.3% premium to its calculated fair value of $146.19. CAT did not earn any Stars in this section. In this section, there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:1. Free Cash Flow Payout 2. Debt To Total Capital 3. Key Metrics 4. Dividend Growth Rate 5. Years of Div. Growth 6. Rolling 4-yr Div. > 15%CAT earned one Star in this section for 1.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The company has paid a cash dividend to shareholders every year since 1914 and has increased its dividend payments for 30 consecutive years. Why would you assume the equity risk and invest in a […]

As part of a new series, each week we typically conduct a DCF on one of the companies in our screens. This week we thought we’d take a look at one of the stocks that is not currently in our screens, Merck & Co Inc ().  ProfileMerck makes pharmaceutical products to treat several conditions in a number of therapeutic areas, including cardiometabolic disease, cancer, and infections. Within cancer, the firm’s immuno-oncology platform is growing as a major contributor to overall sales. The company also has a substantial vaccine business, with treatments to prevent pediatric diseases as well as human papillomavirus, or HPV. Additionally, Merck sells animal health-related drugs. From a geographical perspective, just under half of the company’s sales are generated in the United States.  Recent PerformanceOver the past twelve months, the share price is down 5.47%.Source: Google FinanceInputs Discount Rate: 6% Terminal Growth Rate: 2% WACC: 6% Forecasted Free Cash Flows (FCFs) Year FCF (billions) PV(billions) 2024 12.19 11.50 2025 13.08 11.64 2026 14.03 11.78 2027 15.05 11.92 2028 16.14 12.06 Terminal ValueTerminal Value = FCF * (1 + g) / (r – g) = 411.57 billionPresent Value of Terminal ValuePV of Terminal Value = Terminal Value / (1 + WACC)^5 = 307.55 billionPresent Value of Free Cash FlowsPresent Value of FCFs = ∑ (FCF / (1 + r)^n) = 58.90 billionEnterprise ValueEnterprise Value = Present Value of FCFs + Present Value of Terminal Value = 366.45 billionNet DebtNet Debt = Total Debt – Total Cash = 23.54 billionEquity ValueEquity Value = Enterprise Value – Net Debt […]

After starting the day on a negative note, the benchmarks dragged further as the session progressed and ended the day on weak note.Benchmark equity indices, the BSE Sensex and NSE Nifty50, witnessed a sharp correction, ending the week’s last trading session down by over 1% each, weighed by selling across the counters.At the closing bell, the BSE Sensex stood lower by 1,176 points (down 1.5%).Meanwhile, the NSE Nifty closed lower by 364 points (down 1.5%).Nestle, HDFC Life Insurance, and ICICI Bank were the top gainers today.Trent, Axis Bank, and Tech Mahindra on the other hand, were among the top losers today.The GIFT Nifty ended at 23,635 down by 369 points.The BSE Mid Cap ended 2.1% lower and the BSE Small Cap index ended 2.4% lower.Barring the healthcare sector most sectoral indices are trading negatively with stocks in the power sector, realty sector, and capital goods sector witnessing selling pressure.The rupee is trading at 85.01 against the US$.Gold prices for the latest contract on MCX are trading 0.2% higher at Rs 75,806 per 10 grams.Meanwhile, silver prices are trading 0.6% lower at Rs 86,710 per 1 kg.Here are four reasons why Indian Markets are falling today#1 US Fed FactorThe Fed revised its rate reduction outlook, projecting only two more rate cuts of a quarter-percentage point by the end of 2025 as against the market’s expectations of three or four rate cuts. This seems to have spooked investors#2 FII OutflowA hawkish Fed has strengthened the US dollar and bond yields and accelerated the foreign capital outflow.FIIs (foreign institutional investors) have sold […]

In response to a media member, who at Wednesday’s post-FOMC press conference, asked Jerome Powell if he thinks we’ve avoided the recession that everyone [read: the media and its obsession with the supposed negative indications of the former Yield Curve inversion] was talking about a couple of years ago, the Fed chief replied without missing a beat. Not only have we avoided a recession, but it’s “pretty clear“.“Pretty Clear”? I don’t think so. At least not in the direction you indicate. It is clear to me that the macro continues to swing toward the counter-cyclical, recessionary “bust” end of the spectrum. Below are two indications of that. There are many other negative signals in play as well. But it’s only one article and I’ll update the two I consider among the most important to my macro analysis.  Yield CurvesThe mainstream financial media made a big deal about the supposed recessionary signals of the curve inversion, which we noted at the time was incorrect (it’s the subsequent steepening that lifts the bust side of the boom/bust seesaw), and humorously enough the media then gave the “all clear!” after the curve steepened and un-inverted. Link .Really Mr. Powell? How is it “pretty clear”? I’d like to know because I have two items below currently begging to differ with your view. There are plenty of others as well.We’ll start with the 10yr-2yr Yield Curve, which has steepened as expected since the media’s big negative “inversion” hype campaign of 2022 into 2023. The flattening into inversion runs […]

 Image Source:    GBP/JPY declined to near 196.00 as a higher number of BoE officials voted for an interest rate reduction on Thursday than what market participants had anticipated. UK Retail Sales rose at a slower-than-expected pace in November. Hotter Japan National CPI data for November has boosted BoJ hawkish bets. The GBP/JPY pair is down almost 0.4% to 196.00 in Friday’s North American session. The asset faces selling pressure after the release of the United Kingdom (UK) Retail Sales data for November, which came in slower than projected due to weak demand at clothing stores.The Retail Sales data, a key measure of consumer spending, rose by 0.2%, slower than estimates of 0.5%. Weak Retail Sales data weighed on the Pound  (GBP). However, the major reason behind the British currency’s underperformance across the board on Friday is the dovish buildup for the UK interest rates outlook by the  (BoE).The BoE left its key borrowing rates at 4.75%, as expected, in which three of nine Monetary Policy Committee (MPC) members proposed cutting interest rates by 25 basis points (bps) to 4.5%. However, market participants anticipated that only one policymaker would vote for a dovish interest rate decision.Meanwhile, the Japanese Yen (JPY) ticks higher on Friday on the hotter-than-expected inflation report for November. As measured by the National Consumer Price Index (CPI), the headline inflation accelerated to 2.9% from 2.3% in October. The National CPI, excluding Fresh Food, rose by 2.7%, faster than estimates of 2.6% and the former release of 2.3%.Accelerating price pressures […]

(Click on image to enlarge)The stock market has been charging higher into year end. Then came the Fed interest rate decision and comments.But even a couple weeks before this, an area of the stock market was already pulling back: the The small cap index tested its 2021 highs a couple of weeks ago, where a bearish weekly pattern occurred.Basically, the small caps are still trading within a 4-year trading range (red and green lines).And the Russell 2000 is now testing an important trend line support at (1). Bulls are hoping it holds.In my humble opinion, investors should be watching what happens here with small caps. It will likely send a message about risk-on or risk-off. Stay tuned!Did Nasdaq Out-Performance Double Top At Year 2000 Peak?Nikkei Trading Near 1989 Stock Peak; Double Top?U.S. Dollar Rally Near Critical Inflection Point