Caterpillar Inc.

Management has a strong track record of disciplined capital allocation and shareholder returns. Caterpillar consistently invests in its core business (maintenance capex is a small percentage of revenue at $2.0B in 2024)) and has avoided wasting cash on misguided M&A. Instead it returns almost all excess cash to shareholders.

For example, in 2024 Cat repurchased $7.7B of stock and paid $2.6B in dividends. In mid-2024 management raised the buyback authorization by $20B and increased the dividend 8%. The stock repurchases have been very accretive (shares outstanding have fallen about 15% from 2023 to 2025).

Executive ownership is modest (no founder CEO), but management incentives are aligned (performance-based bonuses, history of raising rewards). We see minimal dilution from stock comp. On the whole, capital has been deployed efficiently into the business (measured returns are very high) and shareholders benefit via buybacks/dividends.

This is a hallmark of a quality business.