Schaeffer's Street Chatter Highlights the Following Stocks: Caterpillar, Coca-Cola, and Anheuser-Busch.

CINCINNATI -- Today's "Street Chatter" from Schaeffer's Investment Research focuses on: Caterpillar (NYSE:CAT), Coca-Cola (NYSE:KO), and Anheuser-Busch (NYSE:BUD). "Street Chatter" is a report that analyzes three newsworthy stocks that are generating a lot of attention on Internet message boards. "Street Chatter" is published on www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research.

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Street Chatter:

Caterpillar

A Caterpillar (NYSE:CAT) announcement that fourth-quarter sales should be better than expected has the shares jumping today. According to a survey of U.S. machinery dealers by Credit Suisse First Boston (CSFB) analysts, European sales for CAT will turn around in 2006. The analysts maintain their earnings estimate of $5.00 per share for 2006, but expect to raise that forecast.

Technically speaking, CAT has scratched its way higher during the short term, rising more than 28 percent since October. What's more, with the help of its 10-day and 20-day moving averages, the equity has taken out former round-number resistance at the 60 level.

Pulling out for a long-term view of the security, I see that CAT has been a solid performer for quite some time. Since January 2003, the stock has enjoyed the tandem support of its 10-month and 20-month moving averages. These long-term trendlines have contained every pullback in the shares during this time frame.

Sentiment toward CAT is not exactly what we would like to see for a bullish stock pick, but optimism toward an outperforming equity is to be expected. Checking in on the security's options outlook, CAT's Schaeffer's put/call open interest ratio (SOIR) has been on the rise lately, advancing from 0.62 in the 29th percentile on December 13 to today's perch at 0.68 in the 40th percentile. This reading is far from what I would consider a positive indicator for the shares, but if the rise in pessimism continues as CAT advances, this sentiment situation could quickly change.

Elsewhere, short sellers decreased their bearish bets by seven percent during December. However, it would still take more than four days to cover the 11.4 million CAT shares sold short. This accumulation of bearish bets could still provide some pop for the equity in the form of a short-covering rally.

Finally, Wall Street hasn't been too keen on this large-cap stock lately. According to Zacks, nine of the 13 covering analysts rate the shares a "hold." Any upgrades from this bunch of holdouts could provide a boost for CAT.

This combination of stellar technical performance and increasingly bearish sentiment backdrop has earned CAT a Schaeffer's Equity Scorecard rating of 7.0 out of 10. Ratings of this ilk indicate that the path of least resistance remains to the upside.

Click the following link to see a Monthly Chart of CAT Since January 2003 With 10-Month and 20-Month Moving Averages and a Daily Chart of CAT Since September 2005 With 10-Day and 20-Day Moving Averages: http://www.schaeffersresearch.com/wire?ID=14984 .

Coca-Cola

Our next two contestants on Street Chatter were hit with downgrades by Goldman Sachs. Coca-Cola (NYSE:KO) has plunged nearly one percent so far today after the brokerage firm lowered its opinion of KO to "in line" from "outperform." According to Goldman Sachs, 2006 won't be a break-through year for KO. The brokerage stated that they "would not put fresh money to work in Coca-Cola, PepsiCo, or Anheuser-Busch."

The rest of the brokerage community, however, seems to disagree. Before this morning's ratings changes, Zacks reported that eight of the 15 analysts covering KO rated the shares a "buy" or better. As all good SchaeffersResearch.com readers know, this type of bullish analyst configuration leaves the door open for potentially damaging downgrades.

The speculative options crowd is also waiting for the world to buy KO. The stock's SOIR has been locked in a downtrend for the past several weeks, with today's reading of 0.40 marking the latest in a string of new annual lows. This increasing optimism toward the security is rather disturbing given its rather lackluster technical performance, which I will cover shortly.

One last thing before we take a gander at KO's technical picture: short interest. Despite a five-percent rise in the number of shored KO shares, it would still take less than two days to cover the 11.4 million shares sold short. Obviously, this pittance of bearish bets leaves little in the way of short-covering support for the security.

Technically speaking, KO has been a sickly sort, underperforming the S&P 500 Index (SPX) on a relative-strength basis since September 2002. Furthermore, the stock is locked in a long-term downtrend, as evidenced by a monthly chart of the cola king. With intermittent support/resistance at its 10-month and 20-month moving averages, KO has settled into a pattern of lower highs and lower lows that dates back to July 1998.

Combining this extremely optimistic sentiment outlook with the security's poor technical showing during the past several years earns KO a Schaeffer's Equity Scorecard rating of 3.0 out of 10.

Click the following link to see a Monthly Chart of KO Since July 1998 With 10-Month and 20-Month Moving Averages: http://www.schaeffersresearch.com/wire?ID=14984 .

Anheuser-Busch

Anheuser-Busch (NYSE:BUD) has lacked the flair this past year that only talking frogs and surfing dogs seem to bring to this version of American beer. Being a fan of German dunkel imports personally, I honestly couldn't tell you what it is about frogs and dogs that makes BUD better, but Goldman Sachs analysts seem to agree that this simply isn't the year for this spirits manufacturer. In fact, the brokerage downgraded its rating on BUD to "underperform" from "in line," citing valuation. Restating the quote from KO, Sachs stated that they "would not put fresh money to work in Coca-Cola, PepsiCo or Anheuser-Busch."

It seems that the rest of the analyst community agrees with this take on BUD, as Zacks reports that 11 of the 15 covering analysts rated the shares a "hold" or worse prior to this morning's downgrade. With eight "holds" and four "buys" hanging over its head, BUD could still see further negativity from this group that would certainly take more fizz out of the shares.

Options players are also heavily bullish on the equity, having shot-gunned a plethora of BUD calls during the past several weeks. In fact, the stock's SOIR has dropped from its December 20 reading of 0.82 in the 15th percentile to today's reading of 0.68. This latest reading ranks below 98 percent of all those taken during the past year.

There is some hope lingering in BUD's sentiment backdrop, however, as short interest surged by 34 percent during December to reach 9.7 million shares. While it would take more than four days to cover this pile of pessimistic positions, if BUD continues on its southerly course, these investors will be in no rush to buy back their bets.

Today's downgrade really took some of the pressure out of the bottle for BUD, plunging the shares back below resistance at their 10-week and 20-week moving averages and practically ending the stock's fledgling rally. Furthermore, the security continues to be pressured lower by its declining 10-month moving average, which BUD has not bested on a monthly basis since August. The 40 level appears key for the shares, as BUD has not closed a month below this region since August 2000. However, with heavy optimism residing in the sentiment picture and a worsening technical outlook, BUD has earned a Schaeffer's Equity Scorecard rating of 2.5 out of 10. This lowly reading indicates that the shares could well test this support once again.

Click the following link to see a monthly chart of BUD since August 2000 with 10-Month moving average: http://www.schaeffersresearch.com/wire?ID=14984 .

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About Schaeffer's Investment Research (www.SchaeffersResearch.com)

Schaeffer's Investment Research, founded by Bernie Schaeffer in 1981, is a financial information and trading resources company. It publishes Bernie Schaeffer's Option Advisor, the nation's leading options subscription newsletter. The firm's contrarian approach focuses on stocks with technical and fundamental trends that run counter to investor expectations. The firm's website, http://www.SchaeffersResearch.com , is recognized as one of the leading information sources for stock and options traders and was cited as the top options website by both Forbes and Barron's. Click here for more details about Schaeffer's trading methodology: http://www.SchaeffersResearch.com/method .