Caterpillar soars as investors hunt for hedges against inflation

The company’s stock climbed as much as 6.5% on Tuesday, bringing its 5-day jump to more than 14%. If the gains hold through the close, it would be the largest such move since June 2020. The S&P 500 Index, meanwhile, has fallen 3.1% in the past five sessions.

“The Russia/Ukraine crisis has fundamentally altered global commodity markets and is likely to drive a decade of reinvestment, similar to what the world experienced in the 1970s,” Jefferies analyst Steven Volkmann wrote in a note. The analyst upgraded Caterpillar to buy on Tuesday, saying with Russia locked out of global commodity markets for the foreseeable future, capacity for mining, energy and agricultural commodities will have to be expanded elsewhere to compensate.

Oil extended gains to trade over $128 on Tuesday, with both the U.S. and the U.K. expected to impose a ban on imports of Russian energy.   

Caterpillar, which is seen as a bellwether for the global industrial economy, could be positioned for long-term growth as countries and corporations start investing to expand their productive capacity. That has made it attractive to investors looking for protection against soaring commodity and oil prices.

“Higher energy prices typically leads to more capital expenditure, and Caterpillar is one of the few ways to get exposure in capital goods to oil and gas,” Barclays analyst Adam Seiden said on Monday.