Caterpillar: One of the Best stocks of the Dow, trading Cheap

I find this hard to believe but Caterpillar Inc (NYSE:CAT) shares are down 49.3% since May 7th, now trading at $41 and change.  This week despite the massive selloff CAT announced they would still pay the quarterly cash dividend of 42 cents per share on November 20, 2008, to stockholders of record at the close of business October 20, 2008. 

CAT shares are now trading today with a P/E of 7.36 and a forward P/E of 6.86 and although the analyst ratings date back to earlier this year, the average target price still comes in at $81, do the math with shares trading at $41.  But all of this analyst take really is meaningless at the moment, if statistics and ratings can't keep stocks from falling including Caterpillar, what's the point?

So, let's review a recent analyst take, just for fun. Last week Wachovia cut estimates and its valuation range on Caterpillar (NYSE: CAT), citing channel checks which show further weakening in Europe and North American demand and pricing environment and a likely 2nd-half 2009 flattening of Electric Power demand.

The firm lowered 2008 EPS estimates on Caterpillar from $6.08 to $6.01 and 2009 EPS estimates were lowered from $6.50 to $6.25. The firm is reducing their valuation range from $78-$81 to $60-$63.

Analyst Andrew Casey said, "At this point, while we are concerned about the effect of increased used equipment inventory in North America and Europe on price realization, we are not including a potential deterioration effect in our estimates."

Wachovia is maintaining their Market Perform rating on Caterpillar.

If you still believe in Jim Cramer, here's what he said 5 hours ago about CAT:

Caterpillar (CAT) can retreat back to $43 where it started both before the housing boom and before the energy boom and before BRIC became a dominant force. All of its markets will be challenged with housing downturns worldwide and energy prices retreating from highs, something that I think will happen as economies slow.

Another reason CAT shares have fallen this week is that investors had mixed feelings about Caterpillar Financial Services, a unit of machinery maker Caterpillar Inc launching a $1.25 billion two-part debt sale last month, the first major issue since the recent turbulence in the markets.

So what to make of everything?

Fellow Masters, things are horrible right now, beyond bad.  But if you still have any money left and have faith that things will turn around, Caterpillar is one of the best buys you can make if you think the Dow will ever recover.