Might Want to Catch These Post-Downgrade

 | Oct 29, 2013 | 10:47 AM EDT  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

cmi

,

agco

,

cat

,

de

,

aa

,

etn

Mining equipment, and now farm equipment, are both getting hit and hit hard Tuesday. First there's Cummins (CMI), which makes huge engines, some of which are used for mining -- a call-out in the release. Then AGCO (AGCO) missed estimates, and its shares have just gotten hammered.

I think this is part and parcel of the great commodity deflation in the system we are seeing right now, be it in corn, which is down 40% year over year; gasoline; or any of the different kinds ore. All of these have been hurt pretty badly this year.

So often we think about a thesis and we put our chips in the game on it, particularly on the short side, and it doesn't pan out. But, for once, if you had monitored the end markets for the heavy equipment, you actually would have caught a good short for Caterpillar (CAT), Cummins and AGCO. I am very surprised that Deere (DE) is not losing ground.

We had an inkling that truck builds were coming down when we heard from Alcoa (AA), which took down its growth rate for trucks. But then Eaton (ETN), which is heavily involved in truck manufacturing, has now started to guide higher based on the recent order pattern. I wonder, then, if this selloff in Cummins might be reflective of past patterns -- and if, when the numbers are cut Wednesday morning by the research community, you'll catch a move intraday that could be a good base to start a position.

I am not saying it is overdone in the case of Cummins, because the stock is up a huge amount. I am saying that, once the estimate cuts are out of the way, you could have a decent turn into the next quarter.

Columnist Conversations

TSLA is trading $256.11, down small with IV30™ down 3.6%. TSLA stock is up 1,068% in three-years and i...
q's didnt bite on the bull move, the russell 2k was doggie and the close was suspect. and i have the short ter...
Lang:
Besides the fact the chart looks great, someone came in with the heavy artillery today in the Oct 22 calls - o...
S&P 500 right at all time closing high as we head towards thee final 45 minutes of trading. Interestingly...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.