Investment capital continues to pour into artificial intelligence projects. As the software improves, better hardware is needed to run more advanced programs. And better facilities are needed to house and operate the hardware operating the software.
That’s why some non-tech stocks are taking off now. They’re a stealth play on the AI trend, and can continue to benefit from its long-term rollout. And these companies can benefit from other trends that happen along the way.
One such trend is construction. New facilities can take years and cost hundreds of millions of dollars to build out. They need materials, labor, and above all big equipment.
That’s helping power the returns of Caterpillar (CAT). The company’s recent blowout earnings came from rising demand for some of their biggest construction equipment.
Caterpillar is now up 25 percent over the past year, beating the returns of the S&P 500 by 5 points.
But with shares still at just 15 times earnings, there’s more upside ahead, especially as multi-year construction projects continue to play out.
Action to take: Investors may like shares here, as they have momentum behind them and are likely to trend higher going forward. Caterpillar is also a dividend growth play, yielding 1.7 percent at current prices.
For traders, the April $340 calls, last trading for about $8.00, could see mid-double-digit gains in the coming weeks.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.