My Top 2 Stocks: Caterpillar Inc. (CAT) and Oracle Corporation (ORCL)

This month, we Fools are discussing our top two stock holdings. Today I’ll address the reasons I bought my stocks, how they came to become my largest holdings, why I continue to hold them, and whether I still like the stocks for investors today.

Caterpillar Inc. (NYSE:CAT)
Roughly one-third of the world’s population lived in urban areas in 1950, and more than half of us currently inhabit cities. By 2030, cities and towns of the developing world will make up 80% of urban humanity. Urbanization is fueling demand for the building blocks of modern society. As a result, we’ll need more natural resources, like metals and materials, to build everything from power lines to buildings. And, in order to build out infrastructure, earthmoving and construction will be required.I bought Caterpillar Inc. (NYSE:CAT) and metals and mining conglomerate BHP Billiton plc (ADR) (NYSE:BBL) to potentially profit from this trend. I bought Caterpillar, in particular, for both its product and geographic diversification. As the world’s largest manufacturer of earthmoving, construction, and mining equipment, the company derives nearly 60% of sales internationally.

Emerging markets account for a decent slice of Caterpillar’s sales today, and they’ll likely become a much larger part of revenues over the long term. Caterpillar Inc. (NYSE:CAT) will benefit from a continued rebound in the U.S. housing market, and its purchase of mining equipment maker Bucyrus sets it up nicely for growth long term.

I bought both Caterpillar and BHP Billiton in the midst of the financial crisis, as the construction and building industry was coming to a screeching halt. From the time I bought Caterpillar Inc. (NYSE:CAT) in 2009, it’s grown more than 33% on average annually and has become one of my largest holdings. While I expect Caterpillar to experience short-term headwinds, especially as growth in developing markets slows and demand for commodities cools off, I’m in it for the long haul. And I still like the stock for investors looking to get in today.

Oracle Corporation (NASDAQ:ORCL)
The first tech stock I ever bought was Applied Materials, Inc. (NASDAQ:AMAT). I had just graduated from college, was living in Northern California, and had a close friend who worked at the Silicon Valley semiconductor equipment maker. I had a bit of success with Applied stock and thought I’d dabble into more tech stocks.

I bought Oracle Corporation (NASDAQ:ORCL) in 1998. The world’s second largest software company and the leading provider of software for information management, Oracle’s competitive advantages are its recurring revenue business model, high customer retention, and synergies from acquisitions.

Oracle’s solid long-term track record is largely thanks to founder and CEO Larry Ellison. He adheres to a philosophy of being either No. 1 or No. 2 in a market. If the company can’t achieve that, it’ll either exit the market altogether or leverage its strong balance sheet to acquire a company that will help it get to a market-leading position.