Oakmark’s Bill Nygren sold Caterpillar shares: here’s why

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in… read more.
on Aug 3, 2021
  • Bill Nygren sold CAT shares despite market-beating results last Friday.
  • Stephanie Link gives her reasons why she disagrees with Nygren's call.
  • Shares of the company have slipped 14% from the year-to-date high.

Caterpillar Inc (NYSE: CAT) reported market-beating quarterly results last Friday. On a year-over-year basis, the construction and mining equipment company noted a 28.9% growth in revenue and a massive 200% increase in net profit. For Oakmark’s Bill Nygren, however, it wasn’t enough as he sold CAT on Tuesday.

Bill Nygren’s comments on CNBC’s “Halftime Report”

Nygren elaborated his reasons for pulling out of Caterpillar stock on CNBC’s “Halftime Report”. He said:

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“Over the past year, CAT stock has done very well, and today you have to believe that CAT is a better than average business to continue owning it. We weren’t at that point. At Oakmark, price momentum isn’t a positive thing for us. You see us usually moving in the opposite direction. So, we’re selling stocks that have done well and buying those that have performed poorly. And Caterpillar, at current numbers, to us, doesn’t look that cheap.”

Stephanie Link disagrees with Nygren’s call

During the same interview on CNBC, Stephanie Link of Hightower, however, expressed her disagreement with Nygren’s call. She fixated on the fact that CAT stock is down about 14% from its year-to-date high – a dip that makes up for a good buying opportunity. Link was confident that Caterpillar had strong end markets and said:

“Their resources business hasn’t even really recovered just yet. I think the higher commodity prices and ageing fleets will help this particular part of their business. Moreover, their current CFO has done a great job in terms of margins, and there’s more to go. So, I see CAT as an attractive story for 2021, we’ll see what happens in 2022. But between now and the end of the year, the stock should do well.”

Link expects Caterpillar’s earnings to grow by double-digits. Shares of the $114 billion company that has a price to earnings ratio of 26.17 are up about 2.0% on Tuesday.

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