S&P500 vs Caterpillar (CAT) Stock Performance from 01Apr2014 to 22Nov2019
Caterpillar (CAT) is a global corporation, and its stock has been facing the full impact of the uncertainty and slowdown created by US-China trade war. The stock is currently breaking out from a double bottom pattern and moving up for target $165-170 level, from the current price of $143 per share. The early buy signals came at $120 level.
Stock Trading Strategy: The right time to buy Caterpillar (CAT) stock is when the market is badly down along with this stock price beaten down for global recession fears. Mining industry has been down for many years, so Caterpillar may get some positive growth from the recovery in global mining industry. Caterpillar is truly a long term investor’s stock, and it has created big gains for investors buying the stock on deep corrections.
Infosys stock has been hit today by whistle blower allegations of accounting malpractice related to the recognition of costs and margin reporting of its large deals pushed by its CEO. It appears that the whistle blowers are senior executives of the finance department. Obviously, this is very sensitive and damaging update, and we can expect the Infosys stock to go down with selling pressure till suitable and satisfying reply comes from Infosys Board. The SEC has also been informed about it, so this will take several days or weeks to clear out.
Infosys ADR (NYSE:INFY) is down 13% currently at $9.25 and its showing signs of recovery from oversold levels. But this is not going to be solved in one day. Infosys stock in India will be open for trading tomorrow 22 Oct 2019. It can fall till Rs 630-650 before during this correction period. Infosys stock is a good buying opportunity at Rs 650 for target Rs 900 over the next 2 years, because Infosys overall business is doing well, and it is a fundamentally strong company with diverse portfolio of IT services for large clients worldwide.
The financial impact of this episode appears less but the reputation impact is high. Investors should not rush buy the stock immediately on correction, but they should wait for good reply to come. The stock will tend to bounce back and also correct further till things stabilize. Summary: Buy Infosys (INFY) at 650 for Target 900 in 2 years.
This kind of diversion between equities and bonds usually does not end well for equities. The above chart plots S&P500 index vs Vanguard Total Bond Market ETF (NYSEARCA:BND). The divergence starts from Nov 2016 and appears to be peaking out.
