Mining for Returns - Look No Further Than This Manufacturer
Cecil is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The troubled economic outlook in Europe and the Americas isn't good for any industry. While no industry would benefit from a contract in demand due to lesser disposable income, there's certain sections of the market that are insulated as far as consumer spending goes. But these same industries aren't particularly insulated when it comes to a contract in demand from other companies or Governments. Industrial equipment manufacturers often get hit hard when corporate and Government demand slows. But there are opportunities for construction everywhere, you would argue. Or mining. That's true. So these companies will still have good demand for their services.
Caterpillar (NYSE: CAT) is now the leading manufacturer of original mining equipment throughout the world, and the merger with Bucyrus has given it a strong foothold in China and India. In a world where the demand in the west is low, companies have started looking east for business and currently India and China along with the rest of Asia seem to be fairly promising for these companies. The merger will also allow it to significantly leverage Bucyrus' booming aftermarket part business while providing support and services for its own equipment
Other equipment manufacturers too are eyeing Asia. Volvo AB (NASDAQOTH: VOLVY) will invest $692 million in India over the next few years, the chief executive of the Swedish maker of heavy vehicles said earlier in the month. Of this, 18 billion rupees will be invested in the company's joint venture with India's Eicher Motors Ltd. , Olof Persson told reporters. The remaining investment will be in the company's own operations, he added. Volvo is eyeing the growing demand in India which is building cross-country highways, ports, airports and railway lines to bolster growth in an economy. The government expects investments of up to $1 trillion until 2017 in the infrastructure sector. Not a bad time to enter the market and get a share of that pie.
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