Michael Burry Cashes In On Caterpillar Puts After 4X Gain — Is CAT Stock Still Overvalued?

Caterpillar is facing concerns over slowing growth, AI spending uncertainty, and production roadblocks.

• Michael Burry cut his bearish position in Caterpillar by 75% after his put options gained nearly fourfold.
• CAT shares fell 10% last week, their worst weekly decline in 18 months. 
• Despite strong demand from AI data centers, rising costs and AI spending concerns weigh on sentiment. 

Caterpillar Inc. (CAT) shares drew attention as famed investor Michael Burry revealed he had reduced his bearish position in the construction equipment maker by 75%. Burry said his put options had gained nearly fourfold, prompting him to lock in most of the profits while retaining a smaller position. 

Caterpillar stock traded over 1% lower overnight, ahead of Monday. The stock declined 10% over the week, clocking its worst week in 18 months. 

Burry Books Profits On Caterpillar Bets

In his Substack post, Burry said his Caterpillar put options had appreciated around 300% from their initial value. He then closed three-quarters of the position, effectively securing most of the trade's gains.

“My Caterpillar puts have roughly quadrupled, and today I took them down 75%. The market value of the position is therefore now roughly the same number of dollars it was when I put it on at 2nd Q end.”

The move suggests Burry has profited from the appreciation in his bearish bets while retaining some exposure to Caterpillar shares. Put options make money when a stock falls. By cutting his position by 75%, Burry may believe Caterpillar has limited room to fall further, making the bearish bet less attractive.

Burry’s Premium Valuation For Caterpillar

Michael Burry’s bearish view on Caterpillar largely stemmed from concerns that the stock was too expensive relative to its historical valuation. He believed investors were treating the heavy machinery maker like a fast-growing company rather than a business whose earnings rise and fall with economic cycles.

Burry expected slower economic growth, weaker infrastructure spending and lower demand for equipment to hurt Caterpillar’s earnings. He believed the company’s strong earnings would eventually decline toward normal levels, pressuring its stock valuation and triggering a sharp drop in the share price.

Caterpillar is now about 47% below its June high. According to Barron’s report, Caterpillar's valuation has dropped from nearly 39 times expected earnings earlier this year to around 19 times, reflecting lower expectations for future growth. 

Production Constraints And AI Concerns Weigh On CAT Stock 

Despite Caterpillar’s third-quarter earnings beat, investors were concerned about slower revenue growth and the company's ability to meet rising demand. The company maintained its 2026 revenue growth forecast in the mid- to high-teens, even as demand for generators and power equipment from AI data centers remained strong. 

However, Caterpillar faces production limits that make it difficult to keep up with orders. Its backlog reached a record $78.1 billion, but the increase was smaller than expected. Growing concerns about the AI boom, tariffs and higher diesel prices also weighed on investor confidence. 

DA Davidson lowered its price target on Caterpillar to $685 from $882 but kept a ‘Neutral’ rating. The firm said all three business segments are growing strongly, with backlogs up 96% from a year ago. However, it noted that the stock is still 50% more expensive than its industry peers. 

CAT Stock: Retail View 

On Stocktwits, retail sentiment around the stock remained ‘bullish’. 

A user said, “Selling generators to data halls is real revenue until the halls stop ordering. seems like equipment cycles end the same way, backlog looks endless right before cancellations start showing up quiet.” 

CAT stock has declined 2% year-to-date. 

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