Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Valeant and SunEdison, have not done well during the last 12 months due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average. The top 30 mid-cap stocks (market caps between $1 billion and $10 billion) among hedge funds delivered an average return of 18% during the last four quarters. S&P 500 Index returned only 7.6% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what elite funds and billionaire investors think before doing extensive research on a stock. In this article, we take a closer look at Caterpillar Inc. (NYSE:CAT) from the perspective of those elite funds.
Is Caterpillar Inc. (NYSE:CAT) a good investment right now? Investors who are in the know are becoming hopeful. The number of bullish hedge fund bets moved up by 1 in recent months. CAT was in 32 hedge funds’ portfolios at the end of the third quarter of 2016. There were 31 hedge funds in our database with CAT positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Paypal Holdings Inc (NASDAQ:PYPL), General Motors Company (NYSE:GM), and Metlife Inc (NYSE:MET) to gather more data points.
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year, involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs.
With all of this in mind, we’re going to analyze the fresh action regarding Caterpillar Inc. (NYSE:CAT).
How are hedge funds trading Caterpillar Inc. (NYSE:CAT)?
Heading into the fourth quarter of 2016, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a modest rise of 3% from the second quarter of 2016. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Bill & Melinda Gates Foundation Trust, managed by Michael Larson, holds the biggest position in Caterpillar Inc. (NYSE:CAT). According to regulatory filings, the fund has a $999.6 million position in the stock, comprising 5.4% of its 13F portfolio. On Bill & Melinda Gates Foundation Trust’s heels is Citadel Investment Group, managed by Ken Griffin, which holds $101.3 million worth of call position; 0.1% of its 13F portfolio is allocated to the stock. Remaining professional money managers that are bullish contain D. E. Shaw’s D E Shaw and Alexander Mitchell’s Scopus Asset Management.