Talking Numbers

You won't believe which stock is bucking the trend

You won't believe which stock is bucking the trend

The market continues to fall but one of the worst-performing Dow stocks of 2013, Caterpillar, is cleaning up the market debris this year.

Last year was a different story. In 2013, the Dow Jones industrial average return 26.5 percent—its best since 1995. The index's second-worst performing stock was Caterpillar, which gained a measly 3.5 percent. Even Cat's then-dividend yield of 2.6 percent didn't help much.

What was hurting the equipment-maker was a slump in the mining business. With metals such as gold dropping (the yellow metal was down 28 percent, its worst since 1981), last year was terrible for Caterpillar's top and bottom line as mining companies cut back on capital expenditures. Revenue fell 15.5 percent to just under $55.7 billion while net income, at $3.8 billion, was one-third lower than it was in 2012. Along the way, the company cut 10,000 jobs.

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But, at the beginning of the year, Caterpillar offered a better-than-expected forecast for 2014 and authorized an additional $10 billion of buybacks over the next four years, a significant amount for a company with a market cap currently at $64.7 billion.

CNBC contributor Gina Sanchez, founder of Chantico Global, believes one of the reasons Caterpillar has been strong as of late is that the market almost views it as a defensive stock rather than its role as a cycle stock.

"They have very, very long visibility into their earnings," said Sanchez. "They can project out to 2017."

Sanchez also sees opportunities ahead for Caterpillar in one surprising place: the Asia-Pacific region, particularly China. Last year, the company's Asia-Pacific sales fell 26.8 percent to $12.5 billion. However, over the previous eight years, sales to that region grew at an average annual rate of 21.5 percent. Despite recent data indicating a relative slowdown in China's economy, Sanchez finds some potential.

(Watch: What worries me most about China: Caterpillar CEO)

Caterpillar is "continuing to push into China, building on infrastructure plans there," said Sanchez. "There's still actually something to be gained from that even though China itself is slowing."

Meanwhile, though he considers Caterpillar to be a strong company, Andrew Busch, editor and publisher of The Busch Update, believes the stock could head down as much as 14 percent before rebounding.

"This is an extremely well-run company," said Busch. "This is a company that went from the 1980s, [when it] was losing about a million dollars a day, to being the global leader in this space. So, you really don't want to count them out."

Yet Busch sees a pullback for Caterpillar because it "gapped" higher twice: once around $87.50 per share in late January and a second time around $96 in late March. In a "gap higher," one day's lowest price is higher than the previous day's high. One belief in technical analysis is that when such gaps occur, the stock eventually goes back down to trade at those levels, essentially "filling the gaps."

"We're in a stage where we're going to go back and fill in some holes," said Busch. "So, I would say, let's fill those gaps before we can really see another large move in CAT higher."

To see the full discussion on Caterpillar, with Sanchez on the fundamentals and Busch on the technicals, watch the video above.

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