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Stock Strategist

Caterpillar Innovates as Competition Escalates

We think brand development and investment in design will keep it far ahead of rivals.

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Over the past century,  Caterpillar (CAT) has skillfully constructed a product portfolio that has made it the largest construction and mining equipment manufacturer in the world. Through this process, it has developed the world’s most valuable heavy equipment brand. While many of the segments Caterpillar operates in are highly competitive, we believe its strategy of investing in optimal product design coupled with strong brand development places it far ahead of the competition and will continue to do so. Moreover, we view Caterpillar as the best-run company in the heavy equipment market and especially like its focus on total cost of ownership.

Caterpillar has created a virtuous cycle by manufacturing superior quality equipment that has fostered a premium product reputation. The equipment therefore is highly fungible with known resale values. It also has a robust support infrastructure, which creates a lucrative aftermarket business.

Scott Pope does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.