Caterpillar: A Masterclass In Execution Meeting An Irrationally Exuberant Valuation

2026-05-13 21:03:32 ET

Investment Thesis

The conclusion of what you are about to read is that Caterpillar ( CAT ) stock trades at a disconnect between company performance and stock valuation. That the stock is overvalued to the extent, that I doubt it will be able to deliver returns on par with the broader market seen over the coming three to five years. For me to buy the stock, it would have to drop between 30-50% before it would be interesting at the current valuation, and that’s without considering the event that would make it fall to such an extent. If the trigger for such a contraction was a steep drop in growth, then the margin of safety could expand as it would require repricing the valuation up against a change in company performance and outlook....

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