5 Stocks that Rebound After Recessions

3. Caterpillar Inc. (NYSE:CAT)

Number of Hedge Fund Holders: 54  

Caterpillar Inc. (NYSE:CAT) markets construction and mining equipment. On May 17, the stock climbed by more than 2% after the company approved a new share buyback program worth $15 billion that will be effective from August. Based on the prices as of May 17, the buyback program could total over 72 million shares, or 13.6% of the outstanding shares on March 31. The company expects an increase in demand for mining machines in the coming years to extract raw materials used in the manufacture of electric vehicles. 

On May 20, Tigress Financial analyst Ivan Feinseth maintained a Buy rating on Caterpillar Inc. (NYSE:CAT) stock and raised the price target to $282 from $278, noting that the firm was seeing “strong end-market demand and is well-positioned to benefit from ongoing capital equipment spending”. 

Among the hedge funds being tracked by Insider Monkey, Washington-based firm Fisher Asset Management is a leading shareholder in Caterpillar Inc. (NYSE:CAT), with 7.2 million shares worth more than $1.6 billion. 

In its Q2 2021 investor letter, Oakmark Funds, an asset management firm, highlighted a few stocks and Caterpillar Inc. (NYSE:CAT) was one of them. Here is what the fund said:

“Having followed the company closely for north of a decade, Caterpillar Inc. (NYSE:CAT) 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.”