MoneyINC Logo
Years of

Is CAT Stock a Solid Long Term Investment?

Stock Market

Any person who is considering investing in the stock market for the long term might want to consider a company that's been around for decades like Caterpillar. Why does it matter if you choose a company like this? Every company that is publicly traded on the stock market has gains and losses. It's part of doing business. If you're looking for a company that's always coming out ahead day after day, you're not going to find one. That being said, you might be able to find one that has a proven track record of reliability and sustainability. Those are two things that the company definitely seems to have going for it. Otherwise, they wouldn't have been in business for as long as they have. That means that by default, they should probably be on your radar as a company that might potentially be a good long-term investment. The question is, does the information on their stock support investing in them as a long-term option?

About the Company

At a glance, the first thing that you will notice about the company is that they've been doing business for a very long time, since 1925 to be exact. In addition, they are a Fortune 100 company, meaning that they routinely make enough money to end up at the top of a very prestigious list that most companies only dream of being on. As of last year, they had 107,700 employees and their revenue in 2020 was a mind-boggling $41.74 billion. If you look at the company's stock today, you'll notice that each stock is selling for $232.79. There is no question that this is a significant amount of money. As a matter of fact, Caterpillar stock often sells for more money per share than Tesla. That should tell you how much of a stalwart this company really is. That being said, it's also worth noting that in today's trading, the stock was actually down by 1.03% over yesterday. In other words, the stock lost $2.39 of its value over the course of 24 hours. Is this something that is reflective of the company or is it merely a widespread reaction to what’s happening within the stock market itself? Perhaps the more important question that you have to ask yourself is whether or not this slight downward trend is going to continue and if so, what does that mean for you as a potential investor if you want to buy shares of stock as a long-term investment?

A Solid Foundation

One of the things that Caterpillar has going for it that a lot of other companies lack is the fact that its foundation is not only solid, but also extremely diverse. As previously mentioned, the company has been in business since the 1920s. Clearly, they're doing something right or they never would have survived the Depression, the recession that occurred in 2008, the Covid-19 pandemic and the ongoing issues with the global economy that exist to this day. They've proven that they know how to do business and that they have a product that people not only need, but want to buy. They have outdone much of their competition, so to speak. Another thing that the company has done that has made them so valuable is that they have diversified, creating a company that doesn't focus on only one thing. A lot of people have the misconception that the company only makes construction equipment, but they're actually about so much more. Granted, they are best known for their construction equipment. However, they also sell engines, other types of machinery, insurance and even financial products. When it comes to their machinery and construction equipment, they don't just sell products, either. They actually design, engineer and build those products in-house. That definitely makes them stand out among virtually all of their competition because they don't do business in the same way that most companies do business. They're well established and they don't rely on third parties to do their bidding. That makes them a less risky prospect when you're talking about investing in their stock.

Proven Success

When it comes to closely examining a company's ability to remain successful in the long-term, many stock market analysts believe that a key component of Caterpillar’s success is the fact that they basically built their own infrastructure. However, these same analysts also believe that the company would remain successful even if that infrastructure did not exist. That is genuinely saying something that is worth taking in. By their very nature, stock market analysts don't tend to get terribly excited about the way most companies do business. After all, it's their job to look for issues that could cause a company's stock to plummet. In some cases, it's even their job to look for issues that could eventually cause a company to fail in its entirety. As a direct result, they're always looking for something that could potentially cause a problem. On the rare occasion that they find a company that they believe is strong enough to survive regardless of what type of infrastructure they have within the company, they are essentially saying that they believe the company is strong enough to stand on its own two legs unless something absolutely catastrophic happens out of the blue. Once stock market analysts have this much confidence in a particular company, it's worth taking note. They typically don't have that much confidence in hardly any corporation, so when they do, that should speak volumes if you're thinking about investing.

Why Stock Market Analysts Believe in Caterpillar

Put simply, there are a lot of different reasons that stock market analysts believe that Caterpillar is a company that people should strongly consider investing in for the long-term. First and foremost, they are the largest manufacturer of machinery and construction equipment in the entire world. That means that while they haven't quite secured a monopoly on the business, more people are choosing to do business with them than anyone else. Furthermore, the company is involved in so many different aspects of business that they have essentially secured a strong future for themselves well into the foreseeable future. They help other companies create their own infrastructure. They're also involved in the transportation of oil and gas as well as mining, construction, financial planning and even insurance (as previously mentioned). All of these things combined to ensure that the company remains secure even if one particular aspect of their business isn't going as well as planned. There are so many different avenues that the company is operating on that a problem with just one or two of their departments isn't likely to disrupt the overall profitability of the business itself. Therefore, its stock typically remains strong even when others aren't doing as well. Think about it this way. If another company is building construction equipment and something happens that causes a slowdown in construction across-the-board, then that company's stock begins to plummet as business grinds to a halt. There are a lot of reasons that construction can slow down. One of the reasons that construction might slow down is because the economy isn't doing as well. That means that less people are building houses, less new businesses are starting or expanding, so on and so forth. If a company only focuses on construction equipment, they're not going to do as well when they're not able to sell their equipment as readily as they once were. On the other hand, Caterpillar is involved in so many other things that they might scarcely even notice that there is a slowdown. You have one company's stock which is suddenly taking a nosedive and you have Caterpillar’s stock, which remains largely unchanged.

By the Numbers

In case you're still not convinced, the numbers for Caterpillar stock are nothing short of outstanding. As a matter of fact, when you compare the value of the stock from 2017 up until now, you will quickly realize that its value has increased by 126.8%. Back in April of 2017, the stock was worth $94.14 per share. Today, it's worth more than $200 a share. In addition, the stock increased by almost 30% (29.9%, to be exact) in the last 60 days of 2021 alone. Most stock market analysts agree that the stock is easily going to go up for the remainder of this year as well. In fact, analysts predict that it will increase by roughly 53.7% by the time the year is out. That's definitely good news for anyone that is potentially considering investing in this stock as a long-term investment. Even if you only plan on holding on to the stock for six months or so, you could still make a profit. Should you decide to hold onto it for a year or more, you might potentially be able to make even more.

Fourth Quarter Earnings

As previously mentioned, Caterpillar did very well during its fourth-quarter for 2021. As a matter of fact, they did much better than they had anticipated, earning 23% more in revenue than they had over that same time the previous year. Things are even better when you look at the amount of money that the company earned for the entire year, as Caterpillar made 60% more in 2021 and they did the previous year. Their net profit for the year was $695 million. Things are expected to continue to get even better for the company for the next several years, as construction is expected to continue to increase as a direct result of the slowdown that occurred during the pandemic. These days, virtually everyone wants to build something or add on to something and that means Caterpillar is likely to be doing even more business for quite a long time. This current trend has most stock market analysts believing that the company will continue to do more business than it did the previous year for at least the next three to four years. If you're looking at purchasing the stock as a long-term investment, that's definitely good news for you.

Taking Advantage of the Stock Market

Of course, any person that has ever invested in stock of any kind knows that even with companies like Caterpillar, stock value has a tendency to fluctuate. As a matter of fact, Caterpillar’s stock does tend to follow the general market trend, although their stock is usually far less volatile than a lot of other corporations. That means investors might be able to take advantage by purchasing the stock when the stock market itself is already in a downward trend. Since Caterpillar stock is likely to follow that trend, the ideal situation would be to allow the stock market to start trending downward, purchase several shares of the stock, and then wait until everything starts trending back up in order to resell them. The big difference between Caterpillar’s stock and that of many other companies is that where this particular stock is concerned, it's almost always guaranteed to go back up instead of remaining in a downward trend. It's also highly unlikely that Caterpillar is simply going to go out of business suddenly, as they have a solid foundation, good revenue and proven staying power. It's definitely not like you're investing in some new company that's only been around for a year or so.

If you're an individual who is looking for a solid long-term investment, Caterpillar is definitely one that you should consider including in your portfolio. As a matter of fact, the only potential disadvantage to purchasing their shares of stock is that they are expensive. In order to purchase several shares, you will have to be prepared to spend a few thousand dollars. That being said, it could well be worth it because it might eventually net you a payday that's worth three, four or even five times as much.

Allen Lee

Written by Allen Lee

Allen Lee is a Toronto-based freelance writer who studied business in school but has since turned to other pursuits. He spends more time than is perhaps wise with his eyes fixed on a screen either reading history books, keeping up with international news, or playing the latest releases on the Steam platform, which serve as the subject matter for much of his writing output. Currently, Lee is practicing the smidgen of Chinese that he picked up while visiting the Chinese mainland in hopes of someday being able to read certain historical texts in their original language.

Read more posts by Allen Lee

Related Articles

Stay ahead of the curve with our most recent guides and articles on , freshly curated by our diligent editorial team for your immediate perusal.
As featured on:

Wealth Insight!
Subscribe to our Exclusive Newsletter

Dive into the world of wealth and extravagance with Money Inc! Discover stock tips, businesses, luxury items, and travel experiences curated for the affluent observer.
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram