We recently compiled a list of the 10 Best Performing Dow Stocks in 2024. In this article, we will look at where Caterpillar Inc. (NYSE:CAT) ranks on our list of the best-performing Dow stocks in 2024.

The Dow Jones Industrial Average is one of the most closely watched stock indices globally, often considered a barometer of the overall health and trajectory of the American economy. As a price-weighted index, it is composed of 30 blue-chip companies from various sectors, excluding transportation and utilities. The Dow’s inclusion of companies from diverse industries such as technology, healthcare, finance, and consumer goods makes it a valuable indicator of market trends. Created in 1896 by Charles Dow, the Dow Jones Industrial Average has stood the test of time and, alongside the NASDAQ 100 and the S&P 500, remains one of the most recognized and influential stock market indices in the world.

The Dow’s journey over the past century has been marked by numerous highs and lows, often reflecting the broader economic conditions. For instance, the index experienced some of its worst single-day losses during the 2008 financial crisis. On September 29, 2008, the Dow plunged by 777.68 points, which was its largest single-day point drop at the time. The financial crisis, triggered by the collapse of Lehman Brothers and a series of banking failures, led to panic selling across global markets. That year, the Dow lost nearly 34% of its value, marking one of its worst annual performances. On the flip side, some of the best years in the Dow’s history include 1915, when it rose by a staggering 81.66%, and 1933, when it registered an annual gain of 63.74% amid a recovery from the Great Depression.

Fast forward to 2024, the Dow Jones Industrial Average has continued its volatile yet upward trajectory. As of September 20, 2024, the Dow closed at a new record high of 42,063.36 points, inching up by 38.17 points or 0.09% for the day. This milestone was reached after a period of substantial gains following the Federal Reserve’s decision to ease interest rates—the first such move in four years. The easing of monetary policy has provided a boost to the market, with investor sentiment improving and confidence in the resilience of the American economy strengthening.

Despite some mid-week volatility in the broader market, the Dow is expected to end September on a positive note. This rally was notable, considering the uncertainty surrounding the upcoming U.S. presidential elections, which has led many investors to take a cautious stance and refrain from making significant commitments until the political landscape becomes clearer. Tom Lee, co-founder and head of research at Fundstrat Global Advisors, highlighted this hesitancy during an appearance on CNBC’s “Closing Bell,” noting that “a lot of investors don’t want to commit capital until after Election Day. I don’t think it matters who wins; they just want to get that event behind them.”

Despite these uncertainties, the Dow has shown remarkable resilience, tracking to end the month of September higher. The 30-stock index has hit several fresh all-time highs throughout the year, demonstrating robust performance across key sectors. In fact, as of September 25, 2024, the Dow had reached a 52-week high of 42,299.64 points, representing a year-to-date (YTD) gain of 11.21% and a one-year change of 23.25%. These figures underscore the strength of the index and the performance of its constituent companies.

The success of the Dow in 2024 can be attributed to a range of factors. For one, leading technology and consumer goods companies, which form a significant part of the index, have continued to post strong earnings amid solid consumer demand and operational efficiencies. Moreover, the financial sector has also benefitted from the recent shifts in monetary policy, with lower interest rates driving increased borrowing and investment activities. Additionally, healthcare companies have maintained growth trajectories, as innovation and demand for services remain high in the post-pandemic era.

The top-performing stocks within the Dow Jones Industrial Average in 2024 have played a pivotal role in driving the index to record highs. These companies, known for their strong fundamentals, market leadership, and robust financial health, have outpaced broader market expectations. Investors seeking exposure to blue-chip companies with a track record of stability and consistent returns have found the Dow to be an attractive option.

In this article, we will delve into the 10 best-performing Dow stocks in 2024. From established technology giants to consumer staples that continue to dominate their respective industries, these stocks have led the charge in pushing the Dow Jones Industrial Average to new heights.

Our Methodology

For this article, we utilized a stock screener to identify DJIA index stocks that have shown significant gains year-to-date as of September 25, 2024. We arranged these stocks in ascending order based on their performance. Additionally, we examined the hedge fund sentiment surrounding these stocks, noting the number of hedge fund holders for each as of the end of Q2 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).

Caterpillar Inc. (NYSE:CAT)

Year to date Share Price Gain: 27.93%

Number of Hedge Fund Holders: 49

Caterpillar Inc. (NYSE:CAT) has shown a strong performance in 2024, with the stock gaining 27.93% year-to-date. The company recently reported its Q2 2024 earnings, beating market expectations. Caterpillar Inc. (NYSE:CAT) EPS came in at $5.99, exceeding analysts’ estimates of $5.56. Moreover, the number of hedge fund holders in Q2 2024 increased to 49, compared to 45 in the previous quarter, indicating heightened investor interest.

Caterpillar Inc. (NYSE:CAT) robust earnings performance highlights its solid fundamentals and effective cost management strategy. Despite a 4% decline in sales and revenues compared to the previous year, the company managed to achieve a record adjusted operating profit of $3.7 billion, driven by its strong execution and diverse end-market exposure. The adjusted operating profit margin improved to 22.4%, up by 110 basis points from the same period last year. This improvement reflects Caterpillar Inc. (NYSE:CAT) ability to maintain profitability even in a challenging macroeconomic environment.

The company’s performance in the second quarter was bolstered by a strong showing in the Energy and Transportation segment, where sales to users increased by 10%, offsetting weakness in the Construction Industries and Resource Industries. Caterpillar’s backlog also grew to $28.6 billion, up by $700 million from Q1 2024, demonstrating sustained demand for its products and services.

Additionally, Caterpillar’s free cash flow for the quarter was a robust $2.5 billion. The company continued to focus on shareholder returns, repurchasing $1.8 billion worth of shares and distributing $600 million in dividends. Caterpillar’s recent authorization of an additional $20 billion share repurchase program, coupled with its 8% dividend increase, underscores its commitment to returning capital to shareholders.

The positive outlook for Caterpillar Inc. (NYSE:CAT) adjusted operating profit margins for the full year, anticipated to be above the target range, further solidifies its bullish stance. Continued investments in sustainability and new product initiatives, such as battery-electric mining trucks and hydrogen-powered solutions, position the company for long-term growth. Caterpillar Inc. (NYSE:CAT) strong financial metrics, increased profitability, and strategic focus on high-growth sectors make it a compelling choice for investors looking for stable performance among Dow stocks in 2024.

Overall CAT ranks 5th on our list of the best-performing Dow stocks in 2024. While we acknowledge the potential of  CAT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an 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 was originally published on Insider Monkey.