UPDATE 2-Kynikos Associates' Chanos says he is short Caterpillar - CNBC

Wed Jul 17, 2013 2:51pm EDT

NEW YORK, July 17 (Reuters) - Short-seller Jim Chanos of Kynikos Associates said on Wednesday he is betting against the shares of Caterpillar Inc and still has a short bet against Hewlett-Packard.

Caterpillar shares fell 2 percent after Chanos' comments, which were delivered at the CNBC Institutional Investor Delivering Alpha Conference. Chanos is known for having anticipated the 2001 collapse of energy company Enron.

Chanos, whose Kynikos Associates has roughly $6 billion in assets, said the Peoria, Illinois-based maker of heavy equipment will face "a series of supercommodity headwinds that I don't think its supporters appreciate." He also said that bullish investors in Caterpillar will face long-term disappointment, and that the company is "tied to the wrong products at the wrong part of the cycle."

A spokesman at Caterpillar, the world's largest maker of mining equipment, declined to respond to Chanos's remarks. But the company has acknowledged the slowdown in global mining is weighing on its results.

In April, Caterpillar posted disappointing quarterly results and cut its full-year 2013 profit forecast, citing a drop in demand from mining customers.

The delayed and canceled sales from miners have also prompted Caterpillar to lay off hundreds of workers at its mining equipment plants in Decatur, Illinois, and Milwaukee.

Caterpillar's revised outlook for 2013, which it may update next week when it reports earnings, reflects an expected 50 percent decline in sales of its traditional mining trucks and loaders as well as a 15 percent decline in sales of draglines made by Bucyrus, the Milwaukee-based company it bought in 2010.

Mining equipment is Caterpillar's most profitable product category. Sales to the sector have been hurt in recent quarters because miners, facing investor backlash over unpopular takeovers, budget overruns and falling metal prices, have slashed capital spending, slowed the development on some projects and shelved others entirely.

Not everyone shares Chanos' bearish view on Caterpillar. Ann Duignan, an analyst who covers the company at JPMorgan Chase, recently wrote that she believes "most of the downside risk" from a China slowdown has been priced into Caterpillar's stock. She has an "overweight" recommendation on the shares and a price target of $100.

OTHER STOCK PICKERS' TOP CHOICES

Chanos was one of several top stock pickers offering investors advice at the CNBC event.

Billionaire hedge fund manager Leon Cooperman of Omega Advisors said at the conference that he likes the stock of lab equipment maker Thermo Fisher and pharmacy benefits manager Express Scripts. Cooperman added that he likes financial companies with high yields that can go higher such as Atlas Resources, KKR, Chimera, and Arbor Realty.

Hedge fund manager Chris Hohn, founder of The Children's Investment Fund Management, said he likes the stock of European aerospace company EADS, automaker Porsche, and freight rail operator Aurizon. He said that order backlog and cuts in unit costs make him confident that EADS stock will double in the next two to three years.

Kingdon Capital founder and president Mark Kingdon, meanwhile, said he likes Japanese autos on account of Abenomics, in reference to the loose monetary policies of Japanese Prime Minister Shinzo Abe. Kingdon said he likes Mazda, Fuji Heavy, and Toyota on account of those policies.

Kingdon said all the Japanese carmakers trade at 8 to 10 times earnings, while they should be trading at 13 times earnings. He said Mazda has the most potential upside.

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