Caterpillar - a bet on global growth That one of the best ways to have played the developing-economy boom has been to buy a hundred-year-old US company is delightfully ironic. Caterpillar shares have returned almost 500 per cent during the past decade, despite having fallen by a fourth from their peak early this year. Revenue tripled over the period; earnings per share sextupled. Still, it makes a certain amount of sense that Caterpillar should outperform the miners, construction companies, and railways that are its core customers. It is diversified, so, as a boom in one geography or commodity turns to bust, the company does not feel the full impact, as long as another area is picking up speed. It is also the biggest player in a scale business. But is building piles of money with large yellow trucks now over for investors? World growth is sluggish and it is anyone's guess whether (a) emerging-world demand is a long-term trend that rich-world troubles cannot restrain for long or (b) global deleveraging will keep global output low indefinitely. Caterpillar's comments from its mildly disappointing third-quarter earnings report, released on Monday, were a small classic of corporate equivocality. The company expects world economic growth to improve but not until the second half of next year and then not by much. Bulls on the stock price comfort themselves with its low valuation. It is selling for eight times next years" expected earnings (below most of its peers and most of its customers), has a dividend yield of more than 2 per cent and an admirably clean balance sheet. But this should not reassure anyone. A quick look back at the company's performance in 2009 makes clear what a mistake it is looking at one year of earnings; operating leverage works both ways. Caterpillar's price is 22 times its average earnings per share for the past 10 years - dead even with the S&P 500 when it is measured the same way. Caterpillar remains what it has always been: a way to bet on global growth. If that bet goes wrong, the valuation will not provide much protection.