Gerald Johnson, a director at Caterpillar (CAT), recently bought 100 shares. The buy increased his stake by 3%, or $36,557.
This marks the first insider buy of the year. Last year, a handful of other company directors made small buys in the 100-350 share range. However, they have been far outpaced by significant insider sales, including the company CFO and CHRO, who have each sold millions of dollars worth of shares at a time.
Overall, Caterpillar insiders own 0.2% of shares.
The construction equipment manufacturer is up 11% over the past year, a return about half that of the overall stock market.
That’s still strong performance, given that earnings declined by 12% and revenues dropped by 4%. A potential slowdown in global construction spending amid rising economic uncertainty means this trend is likely to continue in the quarters ahead.
Caterpillar shares currently trade at 16 times earnings, a moderate discount to the overall market. But other metrics, like a 2.7X price-to-sales ratio, suggest shares may still be overvalued.
Action to take: While Caterpillar is a strong brand and global leader, shares have shown a propensity to trade in the $350-360 range over the past year, about where the stock trades now. Shares could see a slight move higher in the months ahead before pulling back again.
For traders, a potential short-term move higher could play out well with the March $390 calls. Last trading for about $4.10, the options could see mid-double-digit returns.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.