Big Short, Bigger Payday: Michael Burry’s CAT Trade Puts Industrial ETFs in the Spotlight

Michael Burry appears to have timed his bearish bet on Caterpillar Inc. (NYSE:CAT) remarkably well, but investors holding industrial and blue-chip ETFs could still be significantly exposed to the machinery giant.

The “Big Short” investor reportedly initiated a short position in Caterpillar near $1,064 and began cutting most of his exposure after the stock tumbled to approximately $559. His put options had reportedly gained nearly 300%, according to the latest account of his trade.

Caterpillar shares have fallen roughly 44% from their June 30 peak.

The trade raises an important question for ETF investors: How much exposure do they still have to a stock that has given bearish investors such a lucrative opportunity?

Which ETFs Have the Most CAT Exposure?

The exposure is particularly significant in the SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), where Caterpillar accounts for 6.38% of the portfolio, making it the fund’s second-largest holding.

The Industrial Select Sector SPDR Fund (NYSE:XLI) has a 4.93% allocation to CAT, while the Vanguard Industrials ETF (NYSE:VIS) holds 5.60%. The Fidelity MSCI Industrials Index ETF (NYSE:FIDU) had a 4.36% allocation.

DIA has approximately $3.2 billion invested in Caterpillar, while XLI holds roughly $1.6 billion.

ETF Investors Are Also Trimming Exposure

ETF investors have already started reducing their Caterpillar exposure. On Nov. 5, ETFs collectively recorded approximately $90 million in net CAT selling, according to GuruFocus data.

DIA led the selling, shedding $69 million worth of shares, followed by XLI with $13.5 million and the SPDR S&P 500 ETF Trust (NYSE:SPY) with $9.3 million.

The developments put Caterpillar’s sharp correction under the spotlight, particularly as investors reassess industrial stocks amid concerns about elevated valuations and the sustainability of AI-related infrastructure spending.

For ETF investors, Burry’s trade reminds them that even diversified funds can carry meaningful single-stock exposure. However, Caterpillar’s decline alone does not establish a bearish outlook for the broader industrial sector, where other holdings could offset its weakness.

Photo: AI by Midjourney