China Real Estate Market Crash: 5 Stocks at Risk

2. Caterpillar Inc. (NYSE:CAT)

Number of Hedge Fund Holders: 54

Caterpillar Inc. (NYSE:CAT) is a leading global construction and mining equipment provider. On August 2, the company announced that China’s mortgage crisis has caused a huge drop in demand for its excavators. In the second quarter of 2022, Caterpillar Inc. (NYSE:CAT) reported that its sales in Asia fell by 17% year-over-year. The company noted that China accounts for 10% of its overall revenue and said that the country’s mortgage crisis is posing a headwind for Caterpillar Inc. (NYSE:CAT) and its peers.

On August 2, Caterpillar Inc. (NYSE:CAT) reported its financial results for the company’s fiscal second quarter of 2022. Caterpillar reported earnings per share of $3.18, beating EPS estimates by $0.16. The company’s revenue came in at $14.25 billion and missed Wall Street estimates by $136 million. As of August 11, Caterpillar Inc. (NYSE:CAT)’s stock has lost 12% year-to-date.

On August 3, Morgan Stanley analyst Dillon Cumming noted that Caterpillar Inc.’s (NYSE:CAT) revenue misses in its construction and resource segment and declining retail sales could lead to peak cycle concerns. The analyst reiterated an ‘Underweight’ rating and $142 price target on Caterpillar Inc. (NYSE:CAT) shares.

At the end of Q1 2022, 54 hedge funds were long Caterpillar Inc. (NYSE:CAT), holding stakes worth $4.01 billion in the company. At the end of 2021, 53 funds held collective CAT stakes worth $4.99 billion. Fisher Asset Management is the most bullish hedge fund on Caterpillar Inc. (NYSE:CAT) among the funds that have revealed their Q2 holdings thus far, owning a $1.34 billion stake in the company.

Here is what Diamond Hill Capital had to say about Caterpillar Inc. (NYSE:CAT) in its “Diamond Hill Large Cap Concentrated Fund” first-quarter 2022 investor letter:

“We also initiated a position in Caterpillar (NYSE:CAT), one of the world’s leading manufacturers of construction and mining equipment. It’s a company we know well, as we have owned it in our large cap portfolio for quite some time. Recent share price weakness provided an opportunity for us to add it to our large cap concentrated portfolio at an attractive discount to our estimate of intrinsic value. We believe Caterpillar stands to benefit from increased capital investment supported by a healthier/recovering end market environment, particularly in construction and mining.”