Posted on 11/15/2010
Caterpillar Inc. (CAT), an industry giant among machinery and tools companies, announced today that it would be buying out Bucyrus International Inc. (BUCY), which specializes in mining equipment. The deal is expected to close in mid-2011, and will cost Caterpillar a total of $8.6 billion dollars, making it the largest acquisition in the company’s history. In fact, the company is offering BUCY shareholders $92.00 per share. That is a premium of over $22.00 (or approximately 32%)! This announcement comes after soaring commodity prices and an overall feeling of turnaround in infrastructure and mining industries. The news caused the price of BUCY to jump up nearly 29% just in one day, as it closed at $89.80 a share. On the other hand CAT was relatively flat for the day posting a gain of just 0.96%, despite being up intraday by more than 3%.
The effect of this announcement was not limited to just these two companies however. For instance, direct competitor of Bucyrus, Joy Global Inc (JOYG) was up 7.35% for the day, perhaps attributed to speculation for the potential of a similar takeover. Additionally, enough price movement in the underlying stocks will reflect in similar movement of that ETF. All three of the stocks (CAT, BUCY, and JOYG) are classified under Industrial Equipment, which is a sub-sector of the broader Dow Jones Industrials group. With that said, and the seemingly positive movements within the sector, we wanted to show you how to identify ETFs that would provide exposure within the industry.
Using the ETF Xray feature, we can easily identify ETFs that have large weightings specifically within this sub-sector. Clicking on the “ETF Xray” link will lead you to the ETF Xray Engine, where you can perform an ETF Drilldown by Sectors or Countries. Initially the sector dropdown menu will default to the 10 broad Dow Jones economic sectors, but it will continue to narrow in on specificity and allow you to select sub- and mini-sectors to search within. So, in this case we would first select “Industrials”, followed by “Industrial Goods & Svcs”, and then “Industrial Equipment”. This tool is a great way to help generate ideas, especially if you are aiming to overweight a particular sector, sub-sector, or mini-sector within your portfolio.