(CAT) Capitalize on the “Age Of Infrastructure” With This Industry Giant

October 16th, 2009

by Ryan Cole, Investment U Research

Forget the British… and the Americans for that matter… the French are coming!

Without any direct stimulus money behind it, the Federal Railroad Administration recently called for proposals on high-speed rail lines in the United States.

Over 80 groups showed interest, but one stood out in particular stood, thanks to an offer of more than 1,000 pages.

It came from SCNF, the firm that runs France’s national railroad and made the TGV high-speed railroad that links Paris to the rest of Europe.

Its American proposal details four major high-speed rail centers – one linking the major urban centers of California, another for Texas, and one in Florida. The fourth – and most ambitious project – would link the Midwest, from Pittsburgh to Minneapolis and Toronto to St. Louis.

(Now you understand now why it was 1,000 pages long!)

Will it happen? Well, even if the Railroad Administration and SCNF come to an agreement, a project of this size wouldn’t be completed for decades. However, the idea still highlights something very important…

A First-World Country With Third-World Infrastructure

Everything is perfectly situated to accommodate an infrastructure revolution in the U.S.

Bounce along the roads of any major city, sit in an airplane traffic jam at an airport, or suffer rolling summer blackouts in California and New York… and you’ll know exactly what I mean.

Let’s just say that we have an American infrastructure that is buckling under the strain.

However, we have a government determined to spend and stimulate its way out of a possible depression and a Democrat at the helm who seems to take plenty of cues from FDR’s work programs.

And as the response to the Federal Railroad Administration’s call to action highlights, we’ve reached a point where firms see big profits in putting time and effort into a new “infrastructure era.”

Moreover, with Congress pondering another stimulus bill, the sector could easily see another cash infusion. And even if nothing new comes down the pipe, SCNF at least has shown how the project can pay for itself.

But what about the specifics?

This Infrastructure Giant Will Be at The Forefront of New Spending

Nailing down the ins and outs of any plan at this point is tricky. But the French and Japanese should benefit from building high-speed rail systems in the U.S. We might also give the Germans rights to build new nuclear plants. And a surprise country might step in to deliver the tools that will help build it all.

But one way or the other, you can bet they’ll rely heavily on Caterpillar (NYSE: CAT). Yes, that’s the same firm that suffered horribly after the housing bubble burst and the credit markets froze up. The stock plunged from over $80 a share to around $23.

Since then, Caterpillar has rebounded impressively and shares now trade over $50. Its price-to-earnings ratio also sits at a reasonable 18.3 – and that’s without any money from big projects.

Further highlighting the company’s strength, Caterpillar actually raised dividends during the worst of last year’s financial storm. It currently churns out a 3.2% yield ($1.68 per share annually) – healthy passive income, just for owning one of the more profitable companies in the world.

With Caterpillar due to release its third-quarter earnings on October 20, now is a good time to get in on a company that has sales and revenues nearly twice as large as its market cap.

If you choose to buy, set a 25% stop-loss and consider reinvesting those healthy dividends. Caterpillar is one of the surest ways to take advantage of America’s stimulus efforts and the coming infrastructure boom.

Good investing,

Ryan Cole

View original at: Investment U