Caterpillar, Inc. (CAT)

The recent run up in this stock is overdone as is the optimism for a V-shaped recovery in housing which would seem to be requisite to justify the current price.

There is a strong likelihood that the company will cut the common dividend later this year and that will have an adverse impact on the stock price when it happens as this outcome is not fully priced into the stock price.

Furthermore the company's growing debt load is concerning as are the tax proposals before congress regarding the taxation of foreign profits for US multinationals. Both the debt and uncertainty surrounding US tax policy going forward are really going to hamper the financial flexibility of this firm in the very near-term.

To put the debt burden in perspective, the company's operating margin last quarter was insufficient to even cover the interest expense for the period and their sequential quarterly revenue continues to shrink. They have already cut-out share buybacks and the dividend will be the next to go.

If they don't get their operating deficits under control or if there is an adverse tax policy outcome in Washington (which is likely given the government's own burgeoning deficits) then their marginal cost of borrowing is likely to continue to mushroom out of control.

This all does not bode well for near-term stock price performance.

I give them a near-term underperform.

Impact of the China stimulus is overdone, especially if the new administration opts to tax the heck out of those profits.