Companies that are good indicators of the entire economy; Intel, Wal-Mart, Pulte Homes, Caterpillar

An interesting article over at CNN pointed out Intel’s revised forecast showing a further downturn in their businesses stood as an overall economic indicator that the economy was worsening. Their thought process behind this was that Intel reaches nearly all aspects of the world in consumers and businesses alike. While this seems to have some merit, it seems like there are some major risks in assuming this is true. Namely, you are assuming that their competition has nothing to do with any downturn in their business as well as many other factors such as operational efficiency and so on. This article will attempt to identify a few other publicly traded companies that tend to reach across multiple industries around the world in hopes of coming up with a better indicator than just relying on a single, technology company as an indicator of future expectations.

Wal-Mart, with operations in nearly every civilized country of the world, seems like a good option to start with, as they seem to be representative of retail sales giants alike. It maybe necessary and diligent to keep in mind that Wal-Mart may somewhat benefit from economic downturns, being a low cost alternative. Having said that, the impact of a recession would still likely have some negative impact on their business.

Wal-Mart Stores, Inc.

Summary

Wal-Mart Stores, Inc. (Wal-Mart) operates retail stores in various formats around the world. The Company earns the trust of its customers every day by providing an assortment of merchandise and services at every day low prices (EDLP), while fostering a culture that rewards and embraces mutual respect, integrity and diversity. Wal-Mart’s operations comprise three business segments: Wal-Mart Stores, Sam’s Club and International. Its Wal-Mart Stores segment is the largest segment of the Company’s business, accounting for 64% of its net sales, during the fiscal year ended January 31, 2008 (fiscal 2008), and operates stores in three different formats in the United States, as well as Wal-Mart’s online retail operations, walmart.com. Its Sam’s Club segment consists of membership warehouse clubs in the United States and the segment’s online retail operations, samsclub.com. Sam’s Club accounted for 11.8% of the Company’s net sales during fiscal 2008. More from Reuters »
As you can see over the last 10 years, their stock price has been relatively flat.

However, over the last year or so, specifically around their last reproted Quarter, their stock price has dropped based upon their performance and expecations. Lately though, you can see that expecations must be turning around. Their next earnings release will be in mid Feb, and in my estimation could be an even greater indicator of the future health of our economy than Intel.

Pulte Homes, Inc.

Summary

Pulte Homes, Inc. is a holding company that, through its subsidiaries, is engaged in the homebuilding and financial services businesses. The Company’s direct subsidiaries include Pulte Diversified Companies, Inc., Del Webb Corporation (Del Webb) and other subsidiaries engaged in the homebuilding business. The Company also has a mortgage banking company, Pulte Mortgage LLC (Pulte Mortgage), which is a subsidiary of Pulte Home Corporation. Homebuilding, its core business, is engaged in the acquisition and development of land principally for residential purposes within the continental United States and Puerto Rico, and the construction of housing on such land targeted for the first-time, first and second move-up, and active adult home buyers. The Company also has one reportable segment for its financial services operations, which consists principally of mortgage banking and title operations conducted through Pulte Mortgage and its other subsidiaries. More from Reuters »
Another company worth looking at, that does a large portion of business in homes and businesses would be construction companies.
The above Pulte Homes stock graphs respectively represent the stock price from its inception, and the last year performance. Bottom line, if they aren’t building homes, many people aren’t working and this affects multiple industries. You can see after their earnings release in October, the price fell – with similar reasons as Wal-Mart, however, they have since rebounded or have gained back some ground. It will be interesting to see how their next release is received by Wall-Street and investors alike, it could be a very good indicator of the future economy.

Caterpillar Inc.

Summary

Caterpillar Inc. operates in three principal lines of business: Machinery, Engines and Financial Products. Machinery deals with the design, manufacture, marketing and sales of construction, mining and forestry machinery. Engines business deals with the design, manufacture, marketing and sales of engines. Financial Products, consists primarily of Caterpillar Financial Services Corporation, Caterpillar Insurance Holdings, Inc., Caterpillar Power Ventures Corporation and their respective subsidiaries. In April 2007, the Company acquired Eurenov S.A.S. In November 2007, it announced the acquisition of the assets of the Blount Forestry Division and assumed product design, development and manufacturing responsibilities. In April 2008, Satyam Computer Services Limited acquired Caterpillar’s market research and customer analytics operations. More from Reuters »
For my final company review, I’ve chosen Caterpillar, because they are a good representation of businesses investing capital in machinery and equipment. As you will see below, since their last earnings release dropped their stock price considerably, they have seen recent increases in sentiment regarding their future, however it is measly to say the least.
In summary, the above companies will all have earnings releases in about a month and half, and they can help fill in the total picture of where 2009 will lead us with regards to this economy recovering any time soon.

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