Is Caterpillar Inc. (CAT) the Best Dow Stock?

We recently published a list of The Best and Worst Dow Stocks. In this article, we are going to take a look at where Caterpillar Inc. (NYSE:CAT) stands against other Dow stocks.

The Dow Jones Industrial Average is a benchmark index of the top 30 companies in the US. It represents the strength of the US economy and carries great historical significance as well.

It also acts as a reference point for analysts and investors. However, not all stocks within this elite group of companies perform equally. While some thrive on innovation and economic boom, others struggle due to various setbacks and economic trends.

We decided to break down the index and find out the best and worst stocks, looking at what was making them perform unexpectedly this year.

Methodology

In order to come up with our ranking of the best and worst Dow stocks, we first assigned a rank to each stock based on the number of hedge funds holding the stock. We then looked at the short interest in each stock and assigned the top rank to the company with the least short interest.

We then combined the two ranks to see which stock was the best on average. The list is in ascending order, with the best stock taking the number one spot.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Caterpillar Inc. (NYSE:CAT)

Number of Hedge Fund Holders: 62

Short Interest as of Apr 30, 2025: 1.66%

Caterpillar Inc. is a manufacturer and seller of mining and construction equipment, industrial gas turbines, off-highway diesel and natural gas engines, and diesel-electric locomotives.

Citing concerns over economic risks from increasing macro uncertainty and recent tariffs, UBS analyst Steven Fisher downgraded some major building materials and machinery stocks recently, including CAT. He downgraded the company from Neutral to Sell and mentioned that tariffs might lead to margin compression by potentially increasing costs and reducing demand.

The analyst highlighted the risk by saying:

“We think there’s more earnings downside for machinery companies related to macroeconomic headwinds that is not yet priced in, despite the pullbacks in the stocks to date.”

As per the guidance, the management anticipates a slight decline in revenues and sales in 2025. Tariffs could add as much as $350 million to the company’s costs. CAT is known as an industry leader in profitability, with EBITDA margins maintaining around 15% even during downturns. The management has already stated in the Q1 earnings call that it is considering measures to reduce the impact of tariffs and maintain profitability.

Overall, CAT ranks 27th on our list of best and worst Dow stocks. While we acknowledge the potential of CAT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than CAT but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

Disclosure: None. This article is originally published at Insider Monkey.