Why CAT is no longer a dog

After sliding 26 percent in 2015, making it the second-worst performer in the Dow Jones industrial average, Caterpillar has surged 30 percent in 2016 to become the Dow's top dog.

The machinery and equipment giant has been one of many companies to suffer alongside commodities price, but as oil and gold have rebounded in 2016, so has mining supplier Caterpillar. And over the past two days, the stock has risen about 7 percent, thanks to a major oil bounce on the back of OPEC's agreement to cut production.

In addition to the commodity comeback, Longbow Research Eli Lustgarten says that the stock's surge in 2016 is due to "accelerated restructuring as well as the company downsizing to a new reality."

Lustgarten rates the company a hold, with the pressure of very weak earnings and instability mitigating his enthusiasm.

Indeed, a large majority of analysts have hold ratings, according to FactSet, with the average price target substantially below the stock's current price.

But some technical analysts are getting excited about the name. Now that the stock has broken about the $84 level that Evercore ISI technical analyst Rich Ross said served as "resistance," Ross says the stock presents an attractive buying opportunity.

Many look to the Dow's worst performers in a given year to outperform in a next, in what is sometimes referred to as the "dogs of the Dow" theory. With commodity moves serving as a big tailwind, Caterpillar is proving to be a remarkable example of a former dog made good.


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Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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