Diamond Hill Capital’s Top 10 Stock Picks

8. Caterpillar Inc. (NYSE:CAT)

Value of Diamond Hill Capital’s 13F Position (9/30/2024): $528 million

Number of Hedge Fund Shareholders (9/30/2024): 52

Hedge funds don’t seem convinced by Caterpillar Inc. (NYSE:CAT)’s strong market performance this year, as their ownership of the stock has remained relatively flat despite CAT shares rising by 33% in 2024. Diamond Hill has also trimmed its own position in the heavy machinery manufacturer by about 187,000 shares in 2024, though it remains the fund’s eighth-largest position. Ken Fisher’s Fisher Asset Management is the largest Caterpillar shareholder among the funds tracked by Insider Monkey.

While Caterpillar Inc. (NYSE:CAT) is often thought of as a stodgy heavy machinery manufacturer, the company does have some interesting exposure to AI as a supplier of backup power for data centers, which JP Morgan noted in a recent price target raise on the stock (to $515 from $500). Citi also likes Caterpillar long-term ($460 price target), but has the stock on a 90-day negative catalyst watch due to the risk of the company missing estimates in the near term. The firm believes that recent Fed cuts and stronger commodity prices will benefit Caterpillar in the long run, but that the market has jumped the gun on just how quickly those benefits will manifest on Caterpillar’s balance sheet.

The Diamond Hill Large Cap Concentrated Strategy shared the latest concerns regarding Caterpillar Inc. (NYSE:CAT)’s near-term outlook in its Q2 2024 investor letter:

“Other bottom Q2 contributors included Caterpillar Inc. (NYSE:CAT) and Home Depot. Shares of heavy construction machinery manufacturer Caterpillar fell as dealer inventories have declined and the market wrestles with concerns construction activity may be decelerating.”