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Tickers in this Article: CAT, DE, TEX
This may not move the earth for you, but there's an entire multi-billion dollar industry that does.

Try not to think of this as digging yourself in deeper, but rather something to build your investment portfolio on.

Caterpillar
As one of world's most renowned industrial companies, you have most certainly seen Caterpillar Inc.'s (NYSE: CAT) name on numerous occasions as you've passed by construction projects. With a market cap of $41 billion, it is largely considered the "gold standard" in the heavy equipment business.

Caterpillar's record earnings over the past few years have in large part been attributable to a robust mining and energy sector, coupled with their first-class manufacturing capability, the largest distribution network in the business and of course, a highly recognizable name.

While 2007 may prove a difficult year for them on the domestic front, largely due to a slowdown in housing and cutbacks in highway construction, a reviving European economy should make up for it. Caterpillar also has a first rate service and logistics operation that is second to none and on which it by far spends the most on research and development.

Deere & Co.
With a market cap of $25 billion, Deere & Co. (NYSE: DE) enjoys a valuable brand name in the agricultural, forestry and to a lesser extent the construction equipment market. Deere has a signficant market share of the highly cyclical agricultural market, being the world's largest as well as large piece of the forestry equipment market.

Agricultural equipment is backbone of Deere and farm sales were weak in 2006 and will perhaps have a modest recovery in 2007. In addition, any kind of slow down in housing could negatively impact Deere. Their strong balance sheet should help them weather the slowdown, even though they must spend heavily on research and development.

Terex
Terex Corp. (NYSE: TEX) is the world's third largest heavy equipment manufacturer, but with a market cap of $6.9 billion, is a fraction of the size of industry heavy weights Caterpillar and Deere. TEX relies on commercial and government projects which can have prolonged periods of inactivity.

From nearly being bankrupt some years ago, Terex has managed to acquire a suite of products such as cranes and aerial platforms that is not only diverse, but is also for the most part filling a niche that CAT and DE aren't. These acquisitions were financed to a large extent with high interest bonds that company is continuing to work off.


Current Situation

How have these three fared over the past year? Let's take a look. Caterpillar had sales of over $40 billion, which translated into revenue growth of 15%, operating income growth over 38% and a growth in return on equity of 40%. On sales of $22 billion, Deere had a 1% revenue growth rate, just over 9% in operating income growth and return on equity of 23.6%. Terex enjoyed sales of just over $7.5 billion which grew their revenue 27%, their operation income 74% and provided a return on equity of almost 25%. So, if you were to buy one of these firms a year ago, which one would it be?

Now, let's look at the results of your investment. If you made a $10,000 investment in CAT a year ago, it would now be worth $8,450. That same $10,000 in DE would now be worth $14,460. And TEX? $10, 000 a year ago would now be worth $18,600.

The obvious choice is not always the best one. Can you dig it?

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