Caterpillar Named 'Fresh Pick' Amid Infrastruture Bill Passage

The passage of the long-delayed $1 trillion infrastructure bill is boosting the industrial sector

Deputy Editor
Nov 8, 2021 at 10:31 AM
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The shares of Caterpillar Inc. (NYSE:CAT) are up 5.4% at $217.00 this morning after Baird named the stock a Fresh Pick, noting the market's ability to absorb Caterpillar's production hike in 2022. The blue chip, as well as the majority of the industrial sector, is also getting a boost on news that the $1 trillion infrastructure bill is finally being pushed through congress. The bill, which has been delayed for months due to disagreements amongst lawmakers, was called a "once in a generation" investment by President Joe Biden, who oversaw the congressional passage of the bill on Saturday. 

Analyst Cowen did add that it doesn't expect substantial revenue opportunities for industrial stocks until "next year/ early 2023." That being said, the brokerage bunch is still on the fence about Caterpillar stock. Of the 15 in coverage, eight consider CAT a "hold" or worse. The 12-month consensus price target of $224.80, meanwhile, is a slim 3.6% premium to last night's close. 

Despite a sharp pullback from its record high of $246.69 in early June, the security is up over 17% in 2021, with support at the 320-day moving average containing some of this negative price action. Today's pop has CAT toppling long-time pressure at its 120-day moving average, set for its highest close since mid-August, should these gains hold. 

An unwinding of bearish sentiment among short-term options traders could put some additional wind at the equity's back. Caterpillar stock's Schaeffer's put/call open interest ratio (SOIR) of 1.18 stands higher than 80% of readings from the past 12 months. In other words, these traders have rarely been more put-biased. 

Today's options trading has already started running wild, with volume at five times the intraday average. So far, 31,000 calls and 7,482 puts have been exchanged. The most popular contract is the weekly 11/12 220-strike call, followed distantly by the 215-strike call in the same series. Positions are being sold to open at both. 

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