17
DECEMBER 2013
ACT
BUSINESS NEWS
AUTHOR:
CHRIS SLEIGHT
is one of
the world’s most internationally
renowned construction
business writers, with
specialist expertise in financial
markets and stock market
analysis. He is editor of KHL’s
market-leading
International
Construction
and is a regular
contributor to
ACT’
s sister
publication,
International
Cranes
and Specialized
Transport
.
November saw
share prices
continue the
impressive growth
of earlier this year
– particularly the
tech sector – but
heavy equipment
makers still lagged
behind.
Chris
Sleight
reports.
A
quick look at this
month’s graph
shows that share
prices continued to enjoy a
pretty much uninterrupted
growth trajectory in
November.
Give or take a few ups and
downs, this has been the
case for the broad market
indicators for the last 12
months. As a result, the
Dow is up nearly 20 percent
compared to a year ago, the
S&P 500 has gained some 25
percent and the tech-heavy
NASDAQ has moved ahead by
more than 30 percent.
Compare that to the
ACT
Heavy Equipment
Index (HEI) for lifting and
construction equipment
manufacturers. That has
gained only about 10 percent
compared to a year ago, and
most of that is due to the
sudden rise at the end of
September from the formation
of CNH Industrial. This
move saw construction and
agricultural equipment maker
CNH merged with a sister
company, Fiat Industrial,
which makes trucks, engines
and power train components.
CNH Industrial is worth
about twice as much as CNH
was, and this is why the
ACT
HEI shot up. If it were not for
this merger, the index would
likely be wallowing around
where it was just prior, with
little or no net gain compared
to a year ago.
Unfortunately, the
ACT
HEI probably paints a more
realistic picture of the world
economy at the moment.
GDP growth is sluggish,
and although there is clearly
a recovery underway, it is
gradual, and the return to full
health will be a slow journey.
One symptom of this is
relatively weak commodity
prices, which has hit
companies like Caterpillar,
which makes mining
equipment besides general
construction machines. It was
primarily the weakness in its
mining business that saw Cat’s
revenues fall some 19 percent
in the third quarter, compared
to a year ago.
But weak metals prices –
ACT Heavy Equipment Index (HEI)
DOW
NASDAQ
S&P 500
35%
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
% change
52 weeks to November 2013
which of course includes
gold – has been a driver for
the Dow. With low interest
rates meaning there has not
been much to be gained form
investing in bonds, and the
classic ‘safe haven’ of gold in
retreat, investors have looked
to other instruments to
provide a limited return and
limited risk.
The answer this year has
been the Dow, which in
terms of equities is about
as safe as you can get. The
index is made up of 30 of
America’s largest corporations
– although Cat is one of them
– including the household
names of business, such
as Boeing, Microsoft and
Walmart. The benefit of being
large, stable corporations
that offer a dividend to
shareholders seems to have
become the new safe haven in
2013.
As the economic recovery
continues, shares in the
ACT
HEI will find momentum
of their own, but there is
not much sign of that at
the moment.
■
ACT’
s Heavy Equipment Index
(HEI) tracks the performance
of eight of America’s most
significant, publicly-traded
construction equipment
manufacturers – Astec
Industries, Caterpillar, CNH,
Deere & Company, Joy Global,
Manitowoc and Terex.
Broad growth
