Sure, economic output has been declining, spurring the market's starvation for an interest rate cut. But several factors are indicating buy signals for the shares.
"Our recent U.S. Construction Dealer Survey suggests North American construction equipment demand may be more resilient than previously thought and that North American inventory levels have declined," Morgan Stanley's Courtney Yakavonis wrote in a note.
"With CAT the second-worst performer in our universe, year-to-date expectations appear more level set for second-quarter vs. prior quarters."
Indeed, Caterpillar shares have risen a mere 5.5% in 2019. This trails not only much of its peer group, but also the S&P 500's year-to-date gain of 19% and the Dow Jones Industrial Average's gain of 15%.
Meanwhile, Action Alerts Plus, TheStreet's premium product revealing all of TheStreet founder Jim Cramer's stock picks, just added to its Caterpillar position partly because management recently said it intends to raise its dividend over the next few years. Currently, the dividend yield is 3.1%, far better than most S&P 500 yields of around 2%, and better than the 10-year treasury's yield of 2%.
Another tailwind is indeed that interest rate cut. Federal Reserve Chairman Jerome Powell testified in front of the House Financial Services Committee Wednesday and made strong indications that macro economic risk factors are pushing the central bank toward a July rate cut. Lower rates are almost always a boon to industrial demand and output.