The Dow Jones Industrial Average (DJINDICES:^DJI) is slightly higher so far in today's session, gaining 38 points as of 1:40 p.m. EDT. Two Dow components leading the index today are Caterpillar (NYSE:CAT) and Merck (NYSE:MRK).

Caterpillar: A strong ship sailing in high seas
Caterpillar's stock has been skyrocketing over the past year, screaming higher from the low $80s to almost $109 Friday. The party doesn't seem to be stopping, either: The company announced a 17% quarterly dividend increase to $0.70 per share earlier this month, and the stock is up more than 1.6% in trading this afternoon.

CAT Chart

CAT data by YCharts.

2014's rapid rise should be viewed with some caution in the short term. Manufacturing heavy-duty equipment for construction and mining is a highly cyclical business. Company management has had a tough time predicting revenue growth in the current environment. And if management can't predict the winds, you can bet that the stock market can't, either.

The result is wide swings and volatility. The company's 10 year chart tells the story.

CAT Chart

CAT data by YCharts.

Since recovering from the financial crisis, Caterpillar shareholders have been on quite a roller coaster ride. I don't see that trend abating anytime soon. Caterpilliar is a strong, well managed company, but its sailing in high seas. Enjoy today's gains, but don't get too enamored if you're a long-term investor.

Merck gains on momentum from acquisition
Like Caterpillar, drug company Merck has had a strong 12 months leading up to today's outperformance. The stock is up nearly 25% since June of last year.

MRK Chart

MRK data by YCharts.

Back on June 9, Merck announced its intention to buy pharmaceutical company Indenix (UNKNOWN:IDIX.DL). This morning Merck began the formal process to do just that, making a tender offer to buy all outstanding shares of Indenix for $24.50 per share in cash. The market responded kindly, pushing Merck up 1.4%.

Merck is a giant in the pharma industry. The company has a market cap of $173 billion and generates revenue of $10 billion per quarter. Idenix is a comparative lightweight with a market cap of just $3.6 billion.

But Merck has had trouble finding growth in recent years. The main driver has been acquisitions, rather than organic growth. While Idenix won't be immediately accretive to revenue, the purchase is a continuation of Merck's long-term strategy.

Even if you're a believer in this strategy and this acquisition, it's difficult to get excited about Merck from a value investing standpoint. Since 2011, the company has experienced declines in both revenue and return on equity. 

MRK Revenue (Quarterly) Chart

MRK Revenue (Quarterly) data by YCharts.

The company trades at 39 times earnings on a trailing-12-month basis. 

The tender offer to purchase Indenix may have the markets excited today, but given a P/E ratio near 40 and declining growth and ROE, this Fool is steering clear.