We recently compiled a list of the 10 Best Heavy Equipment and Industrial Machinery Stocks to Buy. In this article, we are going to take a look at where Caterpillar Inc. (NYSE:CAT) stands against the other heavy equipment and industrial machinery stocks.
The industrial heavy equipment market includes machinery and tools used in construction, mining, agriculture, and industrial applications. According to 360iResearch, this sector is critically important for infrastructure development, mining operations, and large-scale agricultural productivity.
Growing infrastructural developments, rapid urbanization, and the growth of mining activities are fueling the necessity for heavy equipment. In agriculture, improved machinery efficiency remains critical for meeting global food demands. As per 360iResearch, market growth continues to be influenced by technological advancements like automation, loT integration, and sustainability trends focusing on fuel-efficient and electrically powered machinery.
Growth Drivers for the Heavy Equipment Market
Research Nester believes that the autonomous heavy equipment market was worth more than US$11.43 million in 2024 and should surpass US$26.56 million by 2037. The primary growth driver for the rapid expansion is the strong growth projected in the construction industry. The growth in the building and construction industry is aligned with the demand for heavy equipment.
Market experts opine that growth in the construction industry is expected to stem from lower interest rates in 2025. The types of heavy equipment that are used in the construction industry include earthmoving equipment, and material construction industry, among others.
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Key Trends to Look Out For in 2025
As per Stumble Forward, the industrial machinery landscape has been witnessing a massive transformation. Technological advancements are taking place at a rapid pace, with manufacturers adopting cutting-edge tools and processes to beat the competition. Increased automation and robotics, Al integration, green manufacturing, and 3D printing for customization are the key trends likely to drive growth for the industrial machinery industry in 2025.
Automation in industrial machinery tends to reduce the chances of human error and supports streamlining production. Robots, together with machine learning, are being employed to inspect, assemble, and even pack goods. Stumble Forward went on to add that Al-powered systems can predict equipment failures, reducing unexpected costly repairs. This predictive maintenance technology should continue to help industries save thousands of dollars in repair costs.
In 2025, industrial machinery is expected to be designed in a way that will promote sustainability. Energy-efficient machines, including those running on renewable energy, or producing less waste, will be adopted. Finally, the adoption of 3D printing in industrial machinery, which can help produce parts that are lightweight yet incredibly strong, is expected to grow as manufacturers continue to realize its importance. Stumble Forward also added that the ability to print intricate designs should result in innovation, enabling engineers to test prototypes and adjust accordingly.
Our Methodology
To list the 10 Best Heavy Equipment and Industrial Machinery Stocks to Buy, we used a screener and sifted through online rankings. After getting a list of 25-30 stocks, we filtered out the ones having high hedge fund holdings. Finally, the stocks are arranged in ascending order of their hedge fund sentiments, as of Q3 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A construction crew operating a hydraulic shovel during a nighttime project.
Caterpillar Inc. (NYSE:CAT)
Number of Hedge Fund Holders: 50
Caterpillar Inc. (NYSE:CAT) is engaged in manufacturing and selling construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives.
Caterpillar Inc. (NYSE:CAT)’s progress in autonomous technology, mainly in the aggregates sector, provides a significant long-term opportunity for growth. As it continues to develop and implement autonomous solutions, the company is expected to see increased demand from customers looking to improve safety and reduce operational costs.
In November 2024, Caterpillar Inc. (NYSE:CAT) successfully demonstrated the fully autonomous operation of its Cat® 777 off-highway truck at Luck Stone’s Bull Run Quarry in Virginia. This was the company’s first deployment of autonomous technology in the aggregates industry, hinting at its expansion into new sectors.
Wall Street believes that the demand for critical commodities such as copper and lithium should fuel Caterpillar Inc. (NYSE:CAT)’s long-term growth, and the company appears to be perfectly positioned to supply the machinery needed. It plans to ramp up engine production by 125% and its focus on innovations such as remote-controlled equipment and predictive maintenance highlights its commitment to meeting higher demand and driving growth.
Diamond Hill Capital, an investment management company, released its “Large Cap Strategy” third-quarter 2024 investor letter. Here is what the fund said:
“Other top Q3 contributors included HCA Healthcare and Caterpillar Inc. (NYSE:CAT). Heavy construction machinery manufacturer Caterpillar has held up better than industry peers against a challenging macroeconomic backdrop and a generally slowing construction environment.”
Overall CAT ranks 1st on our list of the best heavy equipment and industrial machinery stocks to buy. While we acknowledge the potential of CAT as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than CAT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.