The economic bellwether that no one ever thinks about, Caterpillar (CAT) is a company that designs, develops, engineers, manufactures, markets and sells heavy machinery and engines, including construction equipment, financial products and insurance worldwide. It is the world’s largest construction equipment manufacturer. As such, its success and failure are seen as a preview of what’s to come next for the economy at large.

The company was founded by the 1925 merger of the Holt Manufacturing Company and the C. L. Best Tractor Company, both of which were leaders in the field of steam equipment. Following the merger, CAT consolidated its product lines, eventually expanding into military vehicles and hardware sold to the U.S. Department of Defense in World War II. 

Today, Caterpillar produces machines ranging from tractors to hydraulic excavators, backhoe loaders, motor graders, off-highway trucks, wheel loaders, agricultural tractors, locomotives and more. Its products are used in the construction, road-building, mining, forestry, energy, transportation and material-handling industries.  

Rationale 

A direct way to gain exposure to Caterpillar is to buy the listed shares. But that can be a risky approach, given Caterpillar’s wide business interests. It’s no accident that fluctuations in CAT’s stock price are seen as an economic bellwether – a slowdown in construction spending often portends a broader economic slowdown. That ties Caterpillar closely to market forces that are outside of its control.

A solution that can dampen some of that volatility is to buy funds that provide exposure to Caterpillar and other similar firms, rather than CAT shares themselves. After all, the return drivers that will benefit Caterpillar might also benefit other similar firms in construction, manufacturing, and heavy industry. As investment management is gradually moving to the construction of portfolios using ETFs and mutual funds in addition to single stocks, investors would do well to consider gain exposure to firms like CAT through these types of funds.

Investing in CAT 

A search on Magnifi suggests that investors can gain access to CAT via a number of different funds and ETFs, including those shown below. 

Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Try it for yourself today.

This blog is sponsored by Magnifi. The information and data are as of the publish date unless otherwise noted and subject to change. This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and should not be construed as investment research or advice. Investors are urged to consult with their financial advisors before buying or selling any securities. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. Past performance is no guarantee of future results. This content may not be reproduced or distributed to any person in whole or in part without the prior written consent of Magnifi. [As a technology company, Magnifi provides access to tools and will be compensated for providing such access. Magnifi does not provide broker-dealer, custodian, investment advice or related investment services.]