Caterpillar participated in the ongoing expansion of domestic industrial investment.

Caterpillar Inc is positioned to benefit from a structural recovery in US industrial output, driven by a shift in trade policy and increased demand for machinery. The company has demonstrated resilience in maintaining pricing and margins despite a contracting manufacturing environment, indicating a strong competitive position. The rise in capital intensity due to AI and infrastructure investments further supports Caterpillar's growth potential, as it operates in a high barrier to entry market with limited competition. This structural change in the economy enhances Caterpillar's long-term prospects.

Caterpillar was among our top contributors in Q1, indicating strong performance and confidence in its future prospects. The company has demonstrated resilience in a complex market environment, and we believe it is well-positioned to navigate the challenges posed by geopolitical instability and the emergence of AI. Our research execution has been robust, and we see Caterpillar as a key player in the industrial sector, benefiting from its adaptability and strong fundamentals.

Caterpillar, one of the world’s leading makers of construction equipment, has been on a record run, which is a bit of a headscratcher. This performance is notable given the mixed signals in the market, including job shedding in over half of U.S. industries and a contracting industrial sector as indicated by the ISM Manufacturing Purchasing Managers’ Index. However, Caterpillar's success suggests it is well-positioned to capitalize on the current economic environment, particularly as small-cap stocks begin to rebound and business optimism rises, driven in part by developments in artificial intelligence.

Caterpillar was added to the portfolio for exposure to industrial automation and reshoring. The manager highlights that the industrial sector, including Caterpillar, contributed meaningfully to performance, driven by strong gains in technology and industrials. The strategic shift into themes like AI infrastructure and regional industrial spending further supports the positive outlook for Caterpillar, indicating its alignment with current and emerging global trends.