5 Commodity Stocks to Buy on the Dip

3. Caterpillar Inc. (NYSE:CAT)

Number of Hedge Fund Holders: 54

YTD Share Price Decline as of July 8: 13.48%

Caterpillar Inc. (NYSE:CAT) was founded in 1925 and is headquartered in Deerfield, Illinois. The company manufactures and sells construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. Caterpillar Inc. (NYSE:CAT) is a notable dividend aristocrat, with 28 years of consecutive dividend growth under its belt. Caterpillar Inc. (NYSE:CAT) stock has stumbled about 13.5% year to date as of July 8. 

On June 8, Caterpillar Inc. (NYSE:CAT) declared a $1.20 per share quarterly dividend, an 8.1% increase from its prior dividend of $1.11. The dividend is payable on August 19, to shareholders of the company as of July 20. 

Cowen analyst Matt Elkott on July 7 maintained an Outperform rating on Caterpillar Inc. (NYSE:CAT) and lowered the price target on the stock to $225 from $255. The analyst expects a wide, longer-term recovery in most sectors, but the macro environment and forex could create hurdles along the way. He shifted his estimates downward due to ongoing supply chain challenges, higher input costs, possible foreign exchange headwinds, rising interest rates, and an economic slowdown.

According to Insider Monkey’s data, 54 hedge funds were bullish on Caterpillar Inc. (NYSE:CAT) at the end of Q1 2022, up from 53 funds in the earlier quarter. Bill & Melinda Gates Foundation Trust is the largest stakeholder of the company, with 7.35 million shares worth $1.6 billion. 

Here is what Oakmark Funds has to say about Caterpillar Inc. (NYSE:CAT) in its Q2 2021 investor letter:

“Having followed the company closely for north of a decade, Caterpillar is a name we know well. For much of its history, the operating efficiency of the company left much to be desired, but its underlying competitive position was rarely in doubt. A series of actions over the past decade (e.g., LEAN implementation, improved service mix, optimized manufacturing footprint) helped to narrow the gap between Caterpillar’s potential and its realized results, driving material margin expansion and strong share price performance. In our view, the company remains among the highest quality industrials in the market, but its underlying business is cyclical, which can translate to large swings in both performance and investor sentiment over short time periods. Our ability to focus on the long-term, sustainable earnings power of a business (rather than getting distracted by near-term fluctuations) is our most significant edge when investing in cyclical businesses. Due to the inherent volatility in Caterpillar’s end markets and operating performance, we suspect we’ll have a future opportunity to own this high-quality business at a more attractive price once the cycle turns and today’s enthusiasm wears off.”