Caterpillar (US:CAT) is a deservedly iconic brand when it comes to moving large amounts of earth around in the shortest possible time. Indeed, the distinctive yellow and black branding finds its way onto clothing, footwear and children’s toys. In short, it is a company with a globally recognised presence, a heritage of strong research and development (R&D), products with consequently wide moats in terms of intellectual property, and access to a very large Stateside construction market.
With the shares currently hovering around the long-term average price/earnings (PE) ratio of 16, the company could be ready to boost its value in earnings terms if the infrastructure spending unlocked by the recent deal on the US debt ceiling translates into enough demand for the company’s earth-moving products. Complicating the picture is the question of whether spending by government agencies will ‘trickle down’ to individual companies and thereby positively affect their stock market valuations.
The other reason for investor interest is that Caterpillar is considered something of a bellwether share for institutions that hold large amounts of capital on behalf of retail investors. For example, market tracker specialist and fund manager Vanguard is the company’s biggest shareholder. If America’s revival in manufacturing and reshoring from overseas markets shows any tangible benefit, then Caterpillar should feel it.