Two Adds and an Axe

Bill Baruch is focused on the industrial sector to start the week, don’t miss the two names he’s buying more of, and the one he is dropping.

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Bill Baruch, investment committee member, joins us now. It’s good to see you. Thanks for coming on. You bought more Caterpillar, in fact, and you bought more wabtec. Let’s talk about those first before we get to the sell. Why Cat.

Caterpillar? It didn’t react well to earnings because of the declining backlog, but it was a good earnings report for that quarter. And as Joe said, it’s hanging by a thread. What I’m seeing from my my levels and the uptrend is still intact and the strong closed last week, I think is going to be provide some momentum. We’ll get to 20 to 30.

But I think what the infrastructure spending, the delays, the Inflation Reduction Act, emerging markets are going to be spending more money and then the on shoring here in the U.S., I think there’s just a number of tailwinds as we look to the quarters ahead that this this name should perform. Let’s not forget, we’re just one quarter removed, that it set a record high after a strong report.

So I think in the coming months, we’ll see it bounce back pretty well.

All right. So you’re playing to be a little early maybe, or, you know, not pay so much attention to any of the the macro data thinking more big picture web tech web. Why?

I mean, they’re the locomotive space and freight and rails for passengers and freight. And, you know, I think that’s a terrific place to be. And 60% of the revenues, you know, cover there are 60 reoccurring revenues cover 60% of their profits. I think that’s a really nice thing to look at, especially if we go through, you know, maybe a little bit of a slowdown, although I don’t think we’ll have a hard landing.

I think we’ll be soft or really no landing at all. So I do want to add to some momentum here. The report there was pretty good over to about two weeks ago and it brought it out of the gutter. So, again, I think some strong momentum, the place to be. And I mean, if you look at any place that needs infrastructure rebuilding and continue investment is the locomotive space.

So I think that’s I think that’s really a great but this is a three part play as well.

Yeah. Well, you sold RTX. Is that taking advantage of a stock that popped? It was up 5% and last week and it’s up almost 19% in a month.

Yeah. So that’s part of the three part play here, taking RTX off the table and putting that cash to work and concentrating that in industrials. Remember, go back to middle of the summer. It fell out with the Pratt and Whitney, their engine defect. The stock was down as much as 30%. It bounced back after earnings and had a $10 billion repurchase.

So we’ve come back. It’s only down about 15% from where it was in the summer. So I’m using that as an opportunity to take a step back here. I mean, really, at the end of the day, I mean, look, all the geopolitics, I mean, this is we’re in a knife’s edge in any any sharper than than where we were since the Cold War.

And RTX has really underperformed. So I want to get out of that stock and watch it for bed and concentrate the two names I like the most right now, an industrial. Industrial space. That’s Caterpillar and Wabtec.

Okay. Good stuff, Bill. Thank you. We’ll see you soon. Bill Baruch with a trade alert for us. All right, So we talk to industrials now, Brant, let’s talk banks.—

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Our team at Blue Line Capital, led by founder Bill Baruch, shares their expertise and unique market perspective.

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