The stock market was slightly changed on Tuesday morning with only modest movements despite a favorable reading on consumer confidence and some positive comments from the Federal Reserve Chair Jay Powell regarding the future interest rate and the central bank's monetary policy. From shortly before noon 11.30 EST, Dow Jones Industrial Average (DJINDICES: ^ DJI) was only 3 points up to 26,095. S & P 500 (SNPINDEX: GSPC) increased 3 points to 2,799, and Nasdaq Composite (NASDAQINDEX: IXIC) collected 2 points at 7,557.
Many investors are looking for ways to find growth while protecting them from a potential downturn. The big boom in cannabis stocks has placed great emphasis on marijuana producers, and Aurora Cannabis (NYSE: ACB) published just one important strategic step to try to strengthen its future growth. Even more generally, concerns about the health of the world economy were concerned with Caterpillar (NYSE: CAT) as analysts reacted negatively to the current situation globally.
Aurora acquires a stake in Gaia
Aurora Cannabis saw its share increase 4% after the Canadian cannabis giant announced the latest in a number of purchases. The company said it had acquired 51% of the Portuguese company Gaia Pharm for the purpose of establishing a local plant for the manufacture of medical cannabis and derived products. After the purchase, the company will take the name Aurora Portugal.
Gaia has just received Portuguese approval for an application to build a cannabis plant that will meet EU medical marijuana requirements. Aurora expects the first phase of the construction to be completed in the third quarter of 2020 with a production capacity of 2,000 kilograms a year and expanding to 4,000 kilos annually when Phase 2 is completed.
With the purchase, Aurora expanded the scope of its international network to two dozen companies. Especially Portugal is a solid choice for Aurora as it only allowed medical distribution of cannabis to its own citizens in January. The company will be able to export to other EU countries.
The only missing piece was how much Aurora paid for the acquisition. Many have criticized the continuing cannabis giant for using its shares for free to make strategic purchases. Nevertheless, Aurora has highlighted growth at all costs and this latest move is in line with its long-term strategy.
Caterpillar takes another blow
Elsewhere, Caterpillar shares fell 2%. The recent downward move for the heavy equipment manufacturer's warehouse came after negative comments from UBS analysts warning that the cyclical recovery seen by Caterpillar in recent years could come to an end. UBS made the rare move of downgrading its stock rating all the way from buying to selling in a fall, cutting its price target at Caterpillar by $ 29 to $ 125 per share.
In particular, UBS believes that tailwinds that Caterpillar has gotten from the construction industry in the US and China along with the oil and gas industry are likely to hit a peak in 2019 with a backlink starting in 2020. This may cause a real decline in corporate earnings, somewhat as many Investors are not willing to see. There have already been signs that buyers of equipment are turning to the auction market to retrieve used machines at a discount instead of buying new ones.
The news does not come as a big shock to those who have followed Caterpillar, as the stock fell after the quarterly report at the end of January. Nevertheless, it is up to the company to find out how to balance price increases and the need to include costs to take action to increase demand. It will take careful training of this needle to maintain Caterpillar's growth in the years to come.
Dan Caplinger has no position in any of the mentioned shares. Motley Fool has no position in any of the listed shares. Motley Fool has an information policy.