CATERPILLAR

I put a buy order in this morning for Caterpillar (CAT). My trade executed at 63.00 per share. I have been watching this company for the past 6 months and have seen it come down to the lower end of the trading range on fears of the construction business slowing down. The 52 week price range is $57.98 to $82.03. The low 60's seems like a good entry point for a premier company like Caterpillar. It trades at a P/E of 12.39 and pays a dividend of 1.90 percent.

Caterpillar, Inc. manufactures construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. The company operates in three primary lines of business: machinery, engines, and financial products. The machinery line of business designs, manufactures, markets, and sells construction, mining, and forestry machinery, such as track and wheel tractors, track and wheel loaders, pipelayers, motor graders, wheel tractor-scrapers, track and wheel excavators, backhoe loaders, log skidders, log loaders, off-highway trucks, articulated trucks, paving products, telescopic handlers, skid steer loaders, and related parts. It also offers logistics services for other companies. The engines business line designs, manufactures, markets, and sells engines for the company's machinery; electric power generation systems; on-highway vehicles and locomotives; marine, petroleum, construction, industrial, agricultural, and other applications; and related parts. The financial products line of business includes provision of various financing alternatives to customers and dealers for the company machinery and engines, and solar gas turbines, as well as other equipment and marine vessels. It also offers various forms of insurance to customers and dealers to support the purchase and lease of Caterpillars equipment; and invests in independent power projects using the company's power generation equipment and services. Caterpillar markets its products through various distribution centers and dealers worldwide. The company was founded as Caterpillar Tractor Co. in 1925 and changed its name to Caterpillar, Inc. in 1986. Caterpillar is headquartered in Peoria, Illinois.

WASATCH STRATEGIC INCOME FUND

I put new money to work today in a mutual fund named Wasatch Strategic Income Fund (WASIX). The Wasatch funds are a favorite of mine and I have been a holder of Wasatch Micro Cap for 7 years. It has returned an average of 17.45 percent a year for the past 5 years and 22.71 percent per year for the past 10 years. It is now closed to new investors and this is customary to the Wasatch group. They feel that to get the returns they want they don't want a huge amount of money flooding in because they can't put it to work and get the returns they want. So they close the fund and work with the money they have as very few investors cash in their shares because the returns are so good.
Occasionally they will open a new fund as they did last year with Strategic Income. The fund may invest in equity and fixed income assets, with at least 65 percent of assets in income producing securities. Stocks generally will account for most of the Fund's investments, with those chosen falling into three main categotries: Blue Chip, Dividend Growth, and Value.
I also have shares in Wasatch Small Cap Growth, Wasatch International Growth, Wasatch Small Cap Value, and Wasatch Heritage Growth. The only one open to new investors is Wasatch Heritage Growth which is a fairly new fund.
I think this is an excellent time to invest in a income-oriented type of fund. The current economic enviroment of slow but steady growth is one that historically has been positioned for dividend-paying stocks. As the Boomer population bulge continues to age, I think dividend paying stocks are likely to gain in popularity, which in turn could lead the prices of these stocks to rise.

USO and Halliburton

I sold my shares of United States Oil (USO) on Jan 4 at $48.81. This compnay is basically an ETF (Exchange Traded Trust) that tracks the price of oil. Oil seems to be on a downward trend which is great when you go to fill up your car but not for an investment in USO. I booked a loss of 9.5 percent and am sticking with my rule of never losing more than 10 percent in any one investment.
To replace USO I bought Halliburton (HAL) on Jan 8th for $29.37.
The stocks 52 week range is $26.33 to $41.99 so I'm buying in at the lower part of the range. It has a P/E of 11.03 and a dividend of 1.1 percent.

Halliburton Company provides various services, products, maintenance, engineering, and construction to energy, industrial, and governmental customers worldwide. It operates in six segments: Production Optimization, Fluid Systems, Drilling and Formation Evaluation, Digital and Consulting Solutions, Government and Infrastructure, and Energy and Chemicals. Halliburton was founded in 1919 and is based in Houston, Texas.

I like the broad diversification of this company. It also helps that this is one of Jim Cramers (Mad Money) top three picks for 2007. Instead of betting on a pure oil play like USO this stock gives me exposure to the Energy market but not just to the commodity.

YEAR END REVIEW

1996 was a great year for Stocks. My performance was 13.8 percent which I consider excellent considering my overall portfolio consists of about 60 percent stocks and 40 percent bonds , preferred stocks, and money market accounts.
The Dow Industrials returned 16 percent while the S&P 500 returned 14 percent. The NASDAQ's performance was 9.5 percent.

Using the rule of 72 my portfolio would double every 5.2 years if I could achieve a 13.8 percent return every year. I know this is unrealistic without taking on much more risk than I care to incur. So I will start the new year with the same approach I have used for the past 14 years, broad diversification throughout my portfolio and reinvesting dividends and interest.