Best-Performing Dow Stock of 2025 Will Surprise You

'Tis the season of looking back on this year's stock market performance. With 2026 fast approaching, traders are taking stock of their wins and losses to shape their investment strategies for the new year.

Despite no shortage of volatility, the tech sector was a big winner amid the AI boom. The VanEck Semiconductor ETF (SMH) has amassed a solid 44.6% year-to-date lead, even as overvaluation concerns weighed on the chip sector recently.

The Dow Jones Industrial Average (DJI) is sporting a much more modest lead for 2025, but is still on track for its third consecutive year in the black. Contrary to what many may think, however, the best-performing Dow stock of 2025 is not semiconductor giant Nvidia (NVDA) -- though the company became the first to surpass $5 trillion in market value. It's not even one of its tech counterparts. Good, old-fashioned Caterpillar Inc (NYSE:CAT) that takes the crown.

Leading the Dow with a 61.8% lead for 2025, CAT has been quietly chalking up gains. In addition to eyeing its seventh monthly gain of the year, the equity is also pacing for its seventh-straight positive year, as well as its best annual performance since 2017. While retaliatory tariffs definitely had their impact, the stock extended a rally off April lows to keep stringing record highs. In fact, CAT just scored a Dec. 12 peak of $626.21. 

You wouldn't suspect this outperformance by looking at the options pits. While calls still outpace puts on an overall basis, the equity's 50-day put/call volume at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks higher than 85% of annual readings.

Investors may want to consider adding Caterpillar stock to their portfolios next year, as  its Schaeffer's Volatility Index (SVI) of 30% sits in the 18th percentile of its annual range, implying near-term option traders are pricing in low volatility expectations. Plus, CAT tended to outperform volatility expectations in the past year, as suggested by its Schaeffer's Volatility Scorecard (SVS) of 93 out of 100.