Q. I hear mixed messages about the prospects for my Caterpillar Inc. shares. Please clarify its outlook. - CB, via the Internet

A. The world's largest maker of construction and mining equipment hasn't side-stepped the effects of the global economic downturn.

Its prospects are tied to how quickly the economic picture improves. In the meantime, companywide job cuts continue. It announced plans in January to close plants and eliminate 20,000 workers. That was followed by an announcement of additional lay-offs totaling more than 2,400 people.

Shares of Caterpillar are down 19 percent this year following last year's 36 percent decline. It had a net loss of $112 million in the first quarter, including sizable costs to eliminate jobs, but has a strong balance sheet and plenty of cash flow. James Owens, chairman and chief executive since 2004 and a member of the Obama administration's Economic Recovery Advisory Board, has said he believes the global economy will decline at least 1.3 percent this year. In the US, he doesn't expect the money designated for infrastructure construction in the economic stimulus program to be enough to offset declines in the private sector.

Caterpillar should be able to return to its record-setting revenue level of 2008 within the next five years, Owens recently told shareholders. There is an "80 percent chance that in the next five years we'll be over $50 billion" again, he said. The maker of earthmoving, construction and material-handling machinery and engines derives more than half of its sales from overseas. It is working hard to reduce its inventory and production costs.

Because of economic uncertainties, the consensus analyst rating of Caterpillar stock is "hold", according to Thomson Reuters, consisting of two "strong buys", two "buys", 13 "holds", two "underperforms" and one "sell".

Caterpillar has an extensive dealer network and executives with long careers at the firm. Owens, for example, went to work at the company in 1972. The firm is opposed to golden parachutes and dissolved its poison pill measures in 2005.

One of the biggest worries for Caterpillar would be an extended decline in commodity prices that severely affected mining and energy operations. It also faces strong competition, such as from Japan's Komatsu in the Chinese market.

Caterpillar earnings are expected to decline 79 percent this year versus the 60 percent drop forecast for the farm and construction machinery industry. Next year's projected 32 percent increase is in line with the industry's prospects. The five-year annualised growth forecast of seven percent compares to eight percent expected for its peers.

Q. When are mutual fund prices set? How do they actually do this daily? I am not clear on this. - JF, via the Internet

A. That confuses many investors who are more familiar with trading individual stocks.

An open-end mutual fund's net asset value, or price per share, is set once a day after the major US markets close. The closing prices of all the securities it holds in its portfolio are added up and divided by the number of shares in the fund to come up with the per-share price.

"The investor must get in an order to buy or sell before the market's close to get that day's net asset value," said Mark Salzinger, publisher and editor of The No-Load Fund Investor (noloadfundinvestor.com) in Brentwood, Tennessee. "If you get your order in after the markets close that day, you'll get the price as of the next day's closing."

Exchange-traded funds and closed-end funds, on the other hand, trade like stocks throughout the day and the price paid for shares is the value when the trade is actually being made. By definition, these are "tradable" securities, while open-end mutual funds are "redeemable" securities.

Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, 555 N Central Ave., Suite 302, Phoenix, AZ 85004-1248, or by e-mail at andrewinv@aol.com.

(C) 2009 TRIBUNE MEDIA SERVICES INC.