We recently published a list of 7 Cheap Global Stocks to Buy Right Now. In this article, we are going to take a look at where Caterpillar Inc. (NYSE:CAT) stands against other cheap global stocks to buy right now.
The geopolitical landscape has drastically changed since the beginning of the decade, with the COVID-19 pandemic followed by worldwide spikes in inflation leading to completely different economic tendencies if compared to the previous decade. The conflict in Ukraine brought even more geopolitical turmoil, with many analysts believing that this war represents the end of several political and economic alliances, notably between Europe and Russia on the one hand, and between the USA and China on the other hand. The first so-called alliance of the past led to strong economic growth in both the EU and Russia, as the former used cheap energy and commodities from Russia to fuel its industrial sector (particularly that of Germany), while Russia itself had the freedom to export its capital and source the technology and talent it needed for development. The second so-called alliance, between the USA and China, fueled unprecedented growth in China, in a journey to secure the American market and industry with cheap electronics, components, consumer products, and everything the country needed to grow its technological leadership.
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As the Ukraine conflict unfolded in Eastern Europe, some tendencies from the times of the Cold War proliferated again, with the East and the West isolating each other, as the USA and Europe aligned to support Ukraine, while China had the back of Russia. The aforementioned “old” alliances were shattered, and each region started to face new problems – the EU’s energy security faced unprecedented risks, with energy prices skyrocketing across central and eastern Europe, leading to a slowdown in economic growth and tremendous pressure on the regular consumer. The US and China escalated the trade wars that had their roots in the previous decade – in an attempt to protect its technological leadership, particularly in the AI field, the US imposed restrictions to export semiconductor equipment used in the production of state-of-the-art chips, such as powerful GPUs to train AI models. China imposed some retaliatory restrictions regarding several strategic commodities sourced by the US. Even though the trade wars are still not fully enforced by both parties, the tensions persist and have deep implications for the financial markets and the global economy.
As geographic markets became more disconnected, the stock markets in the USA, Europe, and APAC had quite different performances, with the former leading by a wide margin in 2023-2024. For reference, the 5-year performance of the German stock market lagged that of the US by 57%, China lagged the US by 94%, and Japan lagged the US by 58%. In light of the proliferating geopolitical challenges, which still persist as the new Trump 2.0 administration threatens tariffs on its supposed allies as well as China again, we believe that global companies that are diversified across geographies will be the most favored in the years to come, due to stronger potential to diversify idiosyncratic risk. Furthermore, as the US stock market is currently near all-time highs after a stellar 2023-2024 period, cheap companies trading under 15.0x forward P/E might be the only viable option to buy in the current expensive market. Successful investors like Warren Buffet acknowledged that an overstretched valuation could hinder the subsequent performance of a stock. Here’s precisely what he said during his 1998 letter to shareholders:
“For the investor, a too-high purchase price for the stock of an excellent company can undo the effects of a subsequent decade of favorable business developments.”
Our Methodology
We used a Finviz screener to filter the largest stocks trading at under 15x forward P/E and analyzed the companies’ filings in order to identify 7 promising global companies that generated at least 40% of revenue in the last financial year from outside the US. For each company, we also include the number of hedge funds that own the company as of Q4 2024 and rank them in ascending order.
Why are we interested in 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A construction crew operating a hydraulic shovel during a nighttime project.
Caterpillar Inc. (NYSE:CAT)
Forward P/E ratio as of February 24th: 14.81x
Number of Hedge Fund Holders: 62
Caterpillar Inc. (NYSE:CAT) is a global leader in construction and mining equipment, engines, and industrial power systems. Its heavy machinery is widely used across infrastructure, energy, and resource industries, benefiting from sustained global investment in large-scale projects. Beyond equipment sales, CAT generates strong recurring revenue through parts, services, and digital solutions that enhance fleet efficiency. As the industry shifts toward automation and sustainability, the company is investing in electrified machinery, autonomous technology, and alternative fuels to strengthen its position and adapt to the evolving demands of the heavy equipment market.
Caterpillar Inc. (NYSE:CAT) has demonstrated remarkable growth since 2017, with earnings power tripling and sales increasing by 50%. The company’s success has been driven by its strategy for profitable growth, focusing on operational excellence, expanded services, and sustainability. A key component of their success has been the Operating and Execution model, which enables a more granular understanding of financial performance across products. The company has significantly improved its services business, targeting $28 billion in revenue by 2026, with current progress at $23 billion as of 2023.
Caterpillar Inc. (NYSE:CAT) has demonstrated strong cash generation capabilities, consistently producing $5-10 billion in free cash flow since 2017, except during the 2020 pandemic. The company is experiencing significant growth in the Energy & Transportation segment, particularly driven by data center demand and distributed power generation opportunities. In the mining sector, CAT has made progress in autonomous solutions, making it economically viable for smaller fleets of 10-12 trucks compared to the previous requirement of 70+ trucks. The company maintains a strong balance sheet and has demonstrated resilience during market downturns while continuing to invest in growth opportunities across its business segments. Looking forward, management sees significant organic growth opportunities, particularly in services, distributed generation, data centers, and mining sector growth driven by electrification trends.
Overall, CAT ranks 5th on our list of cheap global stocks to buy right now. While we acknowledge the potential of CAT as an investment, our conviction lies in the belief that 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 is originally published at Insider Monkey.
