Caterpillar stock's latest record comes amid historically low implied volatility
The shares of Caterpillar Inc. (NYSE: CAT) are up 4% to trade at $154.44 this afternoon -- one of the better Dow stocks today and earlier hitting a two-year high of $154.50. And while the security is already enjoying an 18.5% year-over-year lead, with recent support from its 10-day moving average, more upside may soon be on the horizon. That is because today's peak comes amid historically low implied volatility (IV), which has been a bullish combination for Caterpillar stock in the past.
According to data from Schaeffer's Senior Quantitative Analyst Rocky White, there has been one other time in the past five years when the stock was trading within 2% of a 52-week high, while its Schaeffer's Volatility Index (SVI) sat in the 20th percentile of its annual range or lower -- as is the case with CAT's current SVI of 40%, which sits just above the 16th percentile of its 12-month range. The data shows the security was higher a month later, averaging a return of 3.1% for that time period. From its current perch, a move of similar magnitude would put CAT above the $158 mark, a level that has not been reached since 2018.
Analysts are still hesitant towards the stock, with 12 of the 17 in coverage carrying a tepid "hold" or worse rating. Meanwhile, the stock's 12-month consensus target price of $143.38 is a 7.1% discount to its current perch. A renewed push to multi-year highs could prompt a shift in analyst attention, which could in turn supply more tailwinds to the equity.
What's more, the stock's
Schaeffer's Volatility Scorecard (SVS) sits high at 80 out of 100. This means CAT has tended to exceed option traders' volatility expectations during the past year -- a boon for option buyers.