Birdseye View: Caterpillar (CAT) — Moat, Dealers, and the “Picks & Shovels” of the AI Boom

0:00When you're driving down the road and you hit that construction site, I know it's super annoying because you got to slow down and you sit in traffic for like two hours. But did you know that there's a company that powers that construction site that did 10 billion in sales last year? That company is Caterpillar. And today we're going to answer one of the most common questions that any investor that has been investing for a day or for 30 years asks every single time. And that is how do I find the next quality company? You're tuned in to the Investing for Beginners podcast. Investing for Beginners podcast.

0:36The show for the long-term investor. We cut through the noise to focus on what works. Compounding, discipline, and the conviction to buy wonderful businesses and stick with them. Your path to financial freedom. Start now. Welcome back to Investing for Beginners, everybody. I'm Stephen Morris. He is Andrew Saylor on the other side. And today we are diving into a company that is, I brought up because I knew a little bit about them and I thought they might be a solid company. And that's Caterpillar. And Andrew's got the financials. I did the research. And so we're going to see how it pairs up to, to, uh, uh, some of the other great companies that are out there.

1:29And I guess, and my first question for you, Andrew is when, when you start this process, where do you normally start? Do you start with financials? Do you start with pricing? Where do you start? The irony of having like a big old dump truck backing out right now and just beeping super loud is like picture perfect for this episode. Um, I, I, so yeah, I go straight to the financials. Um, especially if I'm like wanting to know, is this expensive or cheap? So I jump on fiscal.ai and start plugging away in the spreadsheet. And I know that sounds like nails on the chalkboard for some people, but that's just how I like to operate.

2:11Um, my question for you is how did you discover this company and is it like like how did you discover mcdonald's like is that how dumb of a question this is or like what made you think of this as a potential stock um so and like i i made a comment about caterpillar a couple episodes ago i don't remember when or what i said um but it was just like a passing comment about something that they do um how i know about cap my dad was was in the mining industry my entire life so i grew up like my playground was in a mine a surface mine literally like i i would be eight nine years old like he would probably go to jail for child neglect like because he would take me to work with him and then i would just run all over a mine and like giant giant loaders dump trucks like you name it but at the same time like i knew the rules like and all the guys out there looked out for me so i mean but that was my childhood getting to go to work with him and and while i was there i learned how to run all the equipment too so i was 10 years old driving a a you know back then in the early 90s probably a four or five million dollar machine um and it got so awesome it got to the point to where if somebody uh on a weekend couldn't make it to work like they would let me help fill in for them as i got older and um the the boss out there would give me a little cash under the table for helping them out.

3:58That's cool. So I have like zero idea of what this means. So like on a mine, how many cat machines do you think would be around there? So it depends like where my dad grew up. I mean, it's the scale. So you have a company like US Aggregates or Martin Marriott, or I'm sorry, not Martin Marriott, Irving Material. incorporated imi um in fact in arizona a good friend of mine he works for imi's concrete subsidiary and they just got a nvidia contract and they're doing like 200 million tons of concrete wow that's insane and you're talking about an operation that probably has like 13 15 dudes So it all depends on what the mine specifically does, because most Martin Marietta's that I've seen, they are huge operations.

5:08But for a lot of them, they're pretty small. So where my dad worked, you're looking at like five to six cat front end loaders um two to three drag lines a couple of haul trucks a bulldozer an earth mover maybe two earth movers yeah so i mean you got as many as many sorry sorry to interrupt i'm getting excited as many cat machines as like people working there like everybody else has their own yeah several million dollar machine so a drag line um yeah you're looking probably 10 million dollars if you buy a brand new one man for one machine and that's just that's just to buy the machine that's i remember uh we were working on my dad's uh one time and a drag line is like this gigantic crane with a bucket on the on it that hangs from cables and basically what it does is it throws the bucket out into the into a lake and then it'll drag the bucket back to it scoop up a whole bunch of material and then it'll just dump it on the ground and they haul it to the plant um and but we were working on my dad's drag line one time when i was a kid and the bearing and again this is back in the 90s so there's a giant bearing that had gone out and that bearing itself was like 30 grand just for the one bearing wow so yeah the the maintenance on these things the the upkeep the prices it's insane how much they spend um to to to make pennies on the material that they sell but they sell so much of it that they're able to be profitable so if we are making our own mine tomorrow how do we go out and buy a caterpillar is it machine like am i saying that right how do you even say it yeah i guess in the trade they just call it the equipment and they would just call it a cat um so and it's funny because as i was doing my research everybody refers to it as caterpillar and like i like if you see in my notes it's all cat and it's not me being lazy it's just that's that's literally how i know it but if we were going to to start um well there's a lot of red tape but if we got through all the governmental red tape with msha and all that stuff um the next thing we'd have to do is get a hold of one of the cat dealers and that's actually when i was doing my research one one of the most awesome um things cat has done that have set themselves apart from their competition which would be komatsu john deere kawasaki i'm just to name a few of the bigger ones there's more lots more but um though those are brands i'm sure you've seen of or heard of um and anyway if one of the things that they do that sets themselves way apart is they have localized dealerships and so uh I can't remember the actual term they use for them.

8:47Independent dealership networks is what they call them on their earnings call. And basically, think of it like a franchise, like a McDonald's franchise, but where a McDonald's franchise might do$2 million in sales. these independent dealership networks are doing 11 billion in sales and they have gigantic territories and they have uh and some of them are even traded on the market uh there's one finning international is one of the larger uh dealerships and they service western canada the uk and south america and they are publicly traded on the canadian market and the and our market and they they did 11.3 billion dollars in sales in 2024 and that's just that's one uh dealer independent dealership and where they make where these dealerships make most of their money is the other thing cad does major that sets itself apart and that is they they make their own uh make their own parts so there is no cummings diesel engine there are no allison transmissions um they are all caterpillar made so any part that you need to fix your your front end loader or your excavator or whatever that is going to come directly from the cat dealership in which you leased and or bought the the machine from and then so their service techs will come out they'll fix your equipment you get back to work and it's just a revolving door of uh for cat in revenue so you mean to tell me tesla wasn't the first people to pioneer this idea they were not cat's been doing this since 1920s i believe nice vertical integration at its finest um how what are some of the differences between like like when you said the franchise um are there any differences between like the cat dealers and like the franchise model that we of yeah one of the another key thing like i said cat gets a lot of their revenue or the dealerships get a lot of their revenue for for the parts and the services that they sell um so because of that and because the dealerships have to buy the parts directly from cat then their cat doesn't charge royalties for for sales and leases and all that stuff they they just you have to buy the dealerships have to buy their their product directly from the cat manufacturer so um cat doesn't supply the machines the dealerships buy them from cat cat doesn't supply the parts the dealerships buy the parts from cat and so there there is no um royalty or anything like that from from the dealerships two cat it's all just like it's straight as much vertical royal or uh integration as you can get even on the sales side which i thought was very fascinating uh and there's not many companies that i know of i know of a few um and i don't think they're publicly traded the the have a a a system built like that where it's the store or the subsidiary company buys its product directly from the main company.

12:40And I think that's brilliant because it allows independent maneuver of each dealership depending on its geographical location, depending on its market, depending on whatever is going on. It allows those dealerships to operate completely independent of each other which i think is is is key yeah that's cool um like how many how many dealers they're not all like doing 11 billion right no i just looked up the one um but they're all substantial um and so they have they have 41 dealers in the United States, 109 internationally, and they service 109 companies. Another thing, or 190 countries, I'm sorry, companies.

13:36Yeah, sure. Anyway, another thing that CAT does that I think, or that I, one, I didn't know, and two, is pretty beneficial. Like I said, Finning International operates in South America. A lot of South America is a developing country and so they aren't affording you know multi-million dollar machines. So CAT created a what would you call it I guess a subsidiary company called SEM which I don't know what that stands for I couldn't find it but anyway it's literally a timu version of a cat made by cat it allows them to play competitively in a market in developing countries that don't have the money to buy their their their products and so no matter and i've seen sem all over the world all when i worked in south America when I worked in the Middle East, when I worked in some of the, you know, Eastern European countries, I saw SEM equipment.

14:53I just didn't know it was CAT. Like, it looked like CAT, but like I said, I just thought it was a Tumu cat. I didn't realize that it was actually owned by Caterpillar. That's fascinating. It's cool to see companies figure out different ways to build revenue streams so what are some other ways that cat differentiates itself creates a moat versus smaller competitors things like that right so when i ask initially um where you start if you start in the financials um i always start with the moat i want to know are they or can they even sustain themselves in the long term before i even start getting into the math of what i hate to do i don't want to waste my time so if they're straight garbage um i start with the moat and one of the very or the very first thing i learned uh moat wise is cat uh are they're pretty much a world bank um which i know it's not unheard of for for companies that offer expensive products to have their own financial arm but cats because they are in 190 different countries they have financial institutions in 190 different countries where their dealerships are, where they're doing the loans for not just their equipment, they're doing loans for services, they're doing loans for parts.

16:21They're even doing the loans for the dealerships to buy their product. So everything is just a revolving door of the cash going right back into CAD's pocket. and i i know this because um after i fill out the spreadsheet then i start filling out some of the metrics they um they like take out they have their own credit line that they take out so even though like you're saying they're providing financing they're also getting financing so that's one of the ways you can benefit from economies of scale is like hey we're a bigger company, we can access cheaper capital and kind of the Costco model. We can share that with our customers in this case, their dealership partners.

17:11Right. And that's actually one of their key, one of their key talking points on their earnings call. And their earnings call was for December or was, was in February, but it was for, for last year, obviously um they aren't doing uh their next earnings call for for this year until later on this month i believe but um one of the things they talked about is their priorities of their capital allocation which i know is like one of your favorite things they talk about and they were talking about their number one goal is to maintain their mid-a credit rating so that they have that that constant capital resource where they can just go get cheap cash if they need it um so their their number one top of the mind goal is to just make sure they're maintaining that credit credit rating at all times uh how many times did you fall asleep during this earnings call and were you on your fishing adventure like you said you might be no i i was I was actually uh running my dog so okay so you stayed awake yeah that's good how much how much of the jargon from our jargon episodes did you hear a lot actually like yeah and it's like I always ignored it before but like now it's like and even in my notes I don't know if you noticed like anytime I mention like headwinds I say somewhere in my notes and I bolded it so that as you're reading my notes you can see it it's like look i'm using their jargon yeah so um but i mean it was uh relatively actually from the earnings calls i've heard theirs was actually fairly jargon free um they did they use headwinds a lot tailwinds um they used caller a few times but that that was always the um the the reporters that was never uh the coo um who was doing the earnings call but uh but yeah it was relatively jargon free um and i guess because i know the company so well just from a consumer side um i was pretty interested in it so um it wasn't as painful as normally i guess you could say yeah i mean that does play a huge role in in helping stay engaged so what what makes their products different um you said you know you've experienced it you've driven them or operated them um what kind of things makes makes them different i mean from an operator standpoint and you any any minor or construction worker they're going to have their preferred product so um you know it's like every every gym owner has their preferred brand of treadmill or whatever every every minor every construction worker will have a you know they might prefer john deere they might prefer kat kamatsu whatever um most of the people my dad worked with all liked cat they like cat because it's dependable.

20:47They like it because it's relatively easy to fix compared to Komatsu or Kawasaki, which you need almost an engineering degree to fix sometimes. So, you know, for example, if a hydraulic line breaks, that's a relatively easy fix. And so you're not going to have the service team come to fix your cat you're just going to buy the hose and fix it yourself rather than pay to have someone else do it um and in some of the the you know like kamatsu that that's kind of not always the case because they're buried and anyway um that that was the biggest thing i think they liked about cats is cat made it easy enough uh to where the minor things the operator can fix themselves.

21:46But still complicated enough when it gets into the hard mechanics of the machine, you still need the service, which I think everybody understands from a consumer. As a consumer, we all understand they need to make money too. And they're not just making it on the sell of the equipment. And that's another big moat, I think for CAT as well is they, they, they, I want to say, I don't remember, I didn't write it down, but in their earnings call, they mentioned, because the most common way to purchase equipment is you'll lease it for a set amount of time. Um, and it's not always a year, like what we normally think of, it could be up to five years, maybe longer, depending on what you're doing.

22:36Um, But the lease, the equipment and the lease to buy is like 89%. It's almost 90%. I don't remember exactly what he said, but it was almost 90. It was way higher than I expected it to be. And so that hit me or struck me a chord with me because, you know, It's like we get you on a subscription model, and then we're just going to sell it to you outright. And then either way, we still kind of have you on a subscription model because you have to come back to us for your parts and your services. And so as long as you operate this equipment, you are going to give us money. I think that's a huge number, like 89%.

23:28you're not if you have a bad product or subpar product you're not you're not gonna earn 89 % of so it's like a good conversion rate or they're they're making their customers very happy because a bunch of them are converting to to paid am I thinking about that right yeah I think so and the there are there's one very specific reason um that I can think of where you know part of that 10 to 15 percent not converting come from and it's not because of an upset customer it's because you know every one of these machines you know it's like a computer every no matter what brand of computer you buy it's always going to have a bug or two in it and or even a car it'll have you know every car has a little something wrong with it but sometimes there is something major wrong with it and a lot of states have a law to protect consumers from that called a lemon law and so uh i i would guess that part of that 10 to 15 percent is from just lemons it's got something wrong with it and in my experience a cat doesn't even try to offer to to um to sell those they'll take it back they'll try to fix it and then they'll just sell it outright um and there have been instances where i've seen uh the they that my dad's company got a new loader and uh it was like every every other day it was breaking down and eventually cat just took it back and gave them a replacement and took it back to wherever.

25:18And I don't know what they did with it from there. I assume they rehabbed it and sold it outright. But yeah, that's a huge number. And like I said, it's basically a revolving subscription model for their customers on a multi-multi-million dollar scale, which is insane. Yeah, that's cool. Is there anything like structurally within the company that helps them create better product, better equipment? How do they stay in the end? That was the other or the number two on their capital allocation is just reinvesting back into the business. um and that's that's funding their operations their r &d um funding their m &a and tech development all that stuff and one of one of the things i didn't realize is um well i like cat always i don't want to say has been ahead of the game but they were one of the first to like integrate scales into their equipment.

26:32So for example, the dump truck you saw backing into your neighbor's property, there is a set amount that truck is allowed to weigh to travel on a public road. So as that truck is getting loaded, back in the day, when my dad was doing it, they had to eyeball They had to learn like this much material of whatever weighs this much. And so I put this many buckets into the back of it. And now they literally have a scale that sits on their computer in their cab where they can measure pretty accurately how much weight they're putting into the back of these trucks. So that saves time because the trucks, you know, when they go hit the scales to pay out when they leave the mine, you know, if they're overloaded, they have to go trim is what they call it, where they dump off the excess.

27:37And you talk about taking people off like truck drivers get mad, obviously, because they get paid by the load. and you're so you're costing them money um or the they don't have to be they're not way underweight of what they need so they don't have to come back to get more um and cat was way ahead of the game on that and to my knowledge um and this is just from being around the industry cat scales in their equipment are some of the best did i answer your question i'm sorry i can nerd out on this stuff Yeah, no, it's cool. So are they, I'd love to double click on the whole cap allocation reinvesting in the business.

28:23Are they talking about AI or any of that stuff? Like Amazon talks about robots in their warehouses. Are we going to start seeing these cat? That sounds like a nightmare, but these big cat cranes moving around by themselves. So no. I don't think that is something that will happen anytime in the near future just because these machines are so big and require. I just don't see how a computer can can have that. I know this seems counterintuitive, but the precise. It's got to be precise, but every time is different. so i mean there's just tons and tons of experience that comes into what what these guys do um and i don't see i don't see ai ever at least as it stands right now being able to take over that um and i know that sounds dumb because obviously a computer can be more precise than a human can but humans have intuition i guess is what what i i'm trying to say like like we have that you know when my dad was digging when when when a drag line is digging in the earth it's underwater you can't see what you're doing so you have to rely on feel what the what the machine feels like it's doing um you have to rely on what you're seeing come out of the water when you take your bucket it out of the water um and so you know sometimes you need to power down sometimes you need to power up like there's just a lot of things that my dad learned over 60 years of doing it i know 50 50 some years of doing it the the i just struggled to believe a machine would be able to do uh from from that standpoint but in the development side this is something i learned from their earnings call that I think is just tops.

30:32And that is CAT is basically double dipping their words, not mine, and the AI pool, meaning that they've got a lot of the contracts for the equipment to develop the ground to build their data centers. And then we've all heard the story, any place where they're building data centers, I think they're in the process of five around me right now. And it's a huge deal because it's like they're like, where's all this energy coming from? Like our grid can't sustain that. And so what Cat is doing is they have this engine called a reciprocating engine. I have no idea what that means. It sounds cool. That's all I know, a reciprocating engine.

31:19And if you know, let me know in the comments what a reciprocating engine is. basically these engines are what power their giant generators and we we've all seen them behind you know the mall up on we're behind the hospital they're usually behind these big fences and they're just giant backup generators so not only is cat developing the land they're providing these generators to be the main power source for a lot of these data centers because like i said are the grid of where they're building them can't support the energy needs. And then the other thing that comes along with that is these engines are getting more and more efficient as far as emissions and fuel consumption and stuff like that go.

32:03And with the government cracking down heavily on emissions, the government's basically signing CAD up for a lot more sales because the companies and property owners and all that are going to have to start buying new cat generators that meet the emission standards so do they give any numbers around this double dipping yeah um so last or in 2025 cat did 10.2 million in sales uh around their their generators going to these um i'm sorry two 10.2 billion in sales going to the generators towards these data centers which shows up on their cash flow statement if you look in the cash uh they have a special word and i didn't write it down um but it's like energy it's energy slash something and i can't remember what it was but it's like a a separate metric they've created to to show what how much revenue is coming from the data centers.

33:14I mean, so I looked at fiscal, like what's their revenue now? 67.5 billion. So a 10 billion increase in revenue would be over 10 % increase, maybe 15%. That's, that's pretty huge just from one talent. Exactly. And that's not going away anytime soon. You know, the more powerful our AI gets, the more data centers we're going to need, the more we need the more energy we need and the our current energy grid isn't going to be able to keep up they aren't going to be able to build these power plants fast enough to to sustain the ai growth but cat can definitely build generators fast enough right super interesting um so we talked about running financials and stuff and i did the dcf before we jumped on I did not realize that they have a backlog.

34:13It went from$30 billion in 2024 to$51.2 billion in 2025. So that is substantial growth. Not able to do the math. My math is, my brain's short-circuiting at the moment, but going from 30 to 50 is a huge step up in growth. that's showing evidence of a lot of demand for the for this equipment and they estimate uh on the earnings call that they will only be able to meet 60 in 2026 so a lot of that backlog is going to carry over just because the they they don't have the the capability of meeting at all in 2026. Yeah. And this is going to grow more. Sorry. This is one of the drawbacks to doing the way I like to do things.

35:10I don't do it like this all the time, but most of the time I'm running a DCF before getting to know the company. And so I did not see the backlog. If you look at their price earnings now, it's like a 40. but if you look at their forward PE it's a 32 and you would argue that having the backlog in your financial statements shows that that forward PE is not like a rosy PE but that's a backlog PE and it explains why companies like CAT and GE for Nova and some of these other kind of second level AI plays, picks and shovels, if you will, of the AI infrastructure boom, why they're getting these premium valuations.

36:00And I like to see hard numbers and I like to see the math. So it's cool to see backlog and things like that. And so, you know, you can kind of check the facts. Hey, we're growing a lot. Okay. Are you? Oh, wow. All right. Yeah, you actually are so um very interesting is there anything else that stands out to you that we didn't cover yet about cat i mean as always you know if uh if you're interested you know go do your own research don't don't just rely on what we say but i i i didn't know uh cat was playing in the AI world and the fact that they're trying to find ways to integrate AI into their equipment to help their operators work more efficiently and faster is pretty awesome.

36:55The fact that they got in, they found a way to get themselves into just the AI crave in general. I mean, And when I started researching them, the last thing I expected to find is AI. And so the fact that they are making so much money just on the back end and on the earnings call, he was like, he was talking about it, but he wasn't saying AI. And so I wasn't even sure what he was talking about. and then he referred to the uh uh to the 10q and he's like go check this out and so i did and it's like holy crap he's talking about ai like cats in the ai game and so i think that's probably the most um interesting thing uh but of course with all motes there's always a drawbridge right there's always a back a back end into the castle and one thing i'm not happy with is it doesn't seem to me that cat has pricing power um if which i know is huge for you if uh john deere uh says okay you know inflate you know we're gonna we're going to run this sale for the for 2026 cat's going to have to follow suit um i couldn't figure out why that's the case uh why why they don't have i think it's just the market they're in in general um whether it's the the resources uh industry which are the is all the mining um the construction industry or the energy uh industry um their their competitors have uh very much a huge say so and how much cat can actually charge and what that means is if inflation is going up two three percent every year cat just can't raise their prices two or three percent every year to offset it so that might be a huge problem coming down the pike if we get down the pike uh guilty i don't but that might be a huge problem uh in the future for cat depending on the market but they also have they've also have ways to offset that um like i said they have sem they have several other subsidiaries that have their own bank they have a great credit rating with uh the powers that be so i mean they can sustain themselves for a long period of time yeah um looked at some of the ratios interest coverage ratio 22 which is healthy long-term or I guess just regular debt equity 1.7.

39:59So they have cash and they also don't have too much debt. So you're looking at the short-term and the long-term is healthy from a financial basis. And then the question becomes, do I like the valuation? Do I like the story? do I like your overall projections about the company itself? So what are your thoughts on all that?

40:30So before I answer, what fair price did you come up with? I didn't actually. Oh, really? Okay. Yeah, like it came back like the DCF said negative returns. So I'm like, oh, that's not good because it is expensive. Like the market has definitely recognized that this is like they recognize this story. And they must be extrapolating what's happening very recently to the next 10 years, which I did not do at all. I just I threw a lazy growth rate and I said, oh, maybe they'll grow with GDP. So obviously, AI boom is not just GDP. yeah and i think i think with with

41:18i mean and again this isn't advice we would never advise i would definitely consider um buying cat right now um but we need to we need to do more math um because obviously uh not trying to buy something that's just going to remain flat. So, but I agree, like when we factor in that, you know, that 10 billion that's already showing up on their cash flow statement for AI. And I actually put it in my notes. They call it their non-GAAP metric is machinery, power, and energy. And so that takes away all their financial arm, takes away all their other stuff. And then below that, they also have another metric for the AI specific.

42:20And so I think when you factor in the AI growth and the insanity that is to come because AI is not going anywhere, it's just going to pick up more steam, I believe. um i would say for probably the next at least the next decade it's going to to continue to grow at rapid rates and maybe i'm too optimistic on that maybe maybe it's only five years i don't know but i mean eventually it has to has to slow down some because it's going way too fast it's not sustainable right now i don't think i don't know man i i think if if we do the if we do all the math and i think it might be a good stock to jump in right now that's what makes it the market because we all have different ideas about ai and you know just all of that and some people are like they hear no pricing power and they're immediately like out of there other people are like yeah i want to be part of an infrastructure boom so that's just kind of shows you know i think a lot of the stock pickers like myself, we like to bash on the efficient market hypothesis, but this is a really good example of why, how can you efficiently price a stock like this when you have all these things where we're all guessing on where the future is because the difference, at least in my mind, just based on this deep dive and you've done a ton of research on this.

43:53So appreciate you bringing that and organizing it all for us i really think it comes down to is what's happening now going to continue for 10 years or is it not like that's going to be a huge difference and nobody knows so how can you price it efficiently and that's what makes this game uh the game that it is you know well and i mean there's that and i i totally agree the pricing power when i saw or when I learned that I was like man that that all the cool things I said got taken down quite a few pegs whenever I learned I don't have pricing power um quite a few but then as I was talking through it it's like you know they've operated this way for for for a long time this isn't new territory for them so one they know how to navigate it uh so can they continue to do that in the future probably i mean logic says yes the other thing is you know where we saw the the when we look at the unfavorable unfavorable price realization for a cat the they had 817 million across all their markets in 2025.

45:18One point where the construction sector had unrealized or unfavorable price realization of 1.13 billion. So a large percentage of cats came from just construction alone. That's not going to stay that way forever. That's just the way the market is right now. The mining industry is not going to the resources is not going to stay at 272 unfavorable for forever. That's going to change in a couple of years. So when you factor in that, I guess, thesis theory, that the market's not going to stay down forever, plus this AI boom I believe is going to continue for several more years. I think the numbers add up.

46:16So what is your takeaway for, let's bring it to a beginner. Maybe somebody hasn't done their first deep dive on a company before. Could be a million reasons why they haven't. But what is your takeaway for something like that? and then was there anything you learned from this process in general? I would say for a beginner, don't do cat.

46:47Cat was a pain. But, you know, I'm being facetious. For a beginner, just download the 10K. AI is a great tool. Ask Chad GPT. you know i want to learn about company x's moat what should i look for and then ctrl f and find it in the 10k and just start reading that that's the that's that's how i did it that's how i continue to do it um i mean i don't need to ask what i need to look for anymore but you know as i was going through some of their financial stuff i copied and pasted it into into my ai i'm like i'm reading this as they don't have pricing power tell me i'm wrong and because you know ai is going to to tell you kind of what you want to hear um so i wanted ai to argue with me that they don't have pricing power and so ai and i went back for a while until i finally felt comfortable in saying on air that i don't believe they have a solid ability to of the of pricing power and so um yeah use your tools and just start because it is a it is a there is a learning curve to it but once you once you get into it it's i'm not as fast as andrew but uh it's not that hard and what was the second part of your question what did i learn yeah um i learned that don't judge a book by its cover um because the the lack of pricing power hit me like a lightning bolt um that was the last i know i know it was towards the top of my notes but it It was one of the last things I learned before I sent it to you.

48:55And I was like all up. I was like, oh, man, I'm buying cat next month. Like, I don't care. And then that pricing power thing hit me. And I won't lie, it hurt. There is a tear. No, I'm kidding. But yeah, don't, don't, you know, and I'm super bad about that. Like I'll, I'll make a judgment before I've finished my, my work. Um, and that oftentimes does one of two things that either blinds me to the negative completely, or it just completely destroys me. And, you know, is cat a great company? Yeah. Cat's a great company. um would the lack of pricing power stop me now it probably i mean it could and it was just like i said it's just because it hit me so hard i don't know if that makes sense i don't know if i said that in an intelligent way but um that's one of the one of the things i continue to learn is i really need to stop doing that yeah absolutely makes sense and we can all relate to that especially me too um it takes less calories to just make the decision early in the process so our brain wants to do that yeah and i mean it's yeah i i let my cart get before my horse um definitely but i i still think like i said once we do some more math i still think cat is probably a solid investment right now because it's just going to continue to go the market's going to continue to grow and they're going to get out of the these uh headwinds and the resources industry and the construction industry and so i don't see cat's growth slowing down anytime soon what about you well did you um is there anything that stands out to you from my research for for cat the the you didn't realize or maybe uh i mean since you looked solely at the numbers you're like oh that actually makes sense and now this number doesn't look so bad anymore yeah it's literally the backlog thing which i was um because you were once you started talking about what they said in the earnings call I was literally control effing while you were talking.

51:28And so maybe I need to put like a backlog entry on my spreadsheet, you know, so I'm not missing that backlog. Cause that's a huge piece of the story. And it's good for me to have a spreadsheet where I can say no to a lot of names. Cause you can't take three hours on every name in the stock market. There's just way too many. So you need to be able to filter, but at the same time you can't judge every book by its cover. and not try to dig as efficiently as you can. So I'm going to do that. I'm going to put a backlog thing, and it's going to be one of my checkers. And that'll take what, like two seconds?

52:06Control-F, backlog. Okay, 2025, 2024. All right, and then it's just another part of my process. So I learned that you can never have a complete process because obviously we just exposed one of my big holes. And so look at the backlog. Definitely. All right. So that's going to wrap it up today. Thanks for joining us. Let us know what you think of CAT. If you've done research into CAT before or just listening to us, tell us your thoughts. I'd love to hear what you guys think about it. or if I miss something in my process of researching cat, I would also love to hear that because I'm always trying to learn, always trying to get better.

52:46And Andrew's pretty much taught me all, all he has to teach me. So let's, I mean, no, I'm kidding. That is far from the truth, but I still love to learn from other sources. So let me know if I missed something that you caught. But yeah, that's going to wrap it up for today. We will see you next time. In the meantime, never, ever, ever forget, invest with a margin of safety. emphasis on the safety. Peace.