Tags: Chanos | Caterpillar | China | bear

Chanos Remains Bearish on Caterpillar, China

By    |   Friday, 16 May 2014 01:24 PM

Star short-seller Jim Chanos says he's keeping his negative bets against equipment maker Caterpillar and China.

As for Caterpillar, "I think people are generally of a belief that this is a North American construction play," he said at the SALT conference, CNBC reported. But that's only 15 percent of the company's business, Chanos said.

"Maybe it's an oil and gas play. Caterpillar is a very diverse company. A big part of their profits are in mining, which continues to decline. The stock is trading above a market multiple for a cyclical company. . . . We don't get it."

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The falling price of commodities such as coal and iron also should hurt Caterpillar, Chanos said. The company's shares have soared 27 percent during the past six months.

Morningstar analyst Adam Fleck offers compliments to Caterpillar, but with caveats.

"Cat's diversified operations should shield it from any one given geography or end market. . . . And restructuring actions, better working capital management, and improved volume should drive margins and cash flow upward," he wrote on Morningstar.com.

"That said, we caution that near-term risks still encircle mining. The company noted that orders for original equipment remains muted, and aftermarket revenue again declined in the first quarter."

In China, Chanos sees weakness in the luxury goods and real estate sectors. China's economic growth shrank to 7.4 percent in the first quarter from 7.7 percent in the fourth quarter.

Meanwhile, Chanos hinted at short positions on Tesla and Netflix.

"Suffice it to say, I think any stock that is trading in the tens of billions of dollars and being valued on 2020 estimates is pretty much on our radar."

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Star short-seller Jim Chanos says he's keeping his negative bets against equipment maker Caterpillar and China.
Chanos, Caterpillar, China, bear
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2014-24-16
Friday, 16 May 2014 01:24 PM
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