Deere & Co. (DE)

Has underperformed in the last little while. Nice dividend yield of 2.31%. Trading at about 10X earnings, which is pretty cheap. The stock has a real opportunity in the next little while to move higher, simply because you are going to see good growth globally and the agricultural sector is going to do a little bit better.

Prior to Ukrainian mess he would have said to sell it. Prefers Agrium for this play. But don’t sell DE now.

10 times earnings. Historically 13 times. There is a good opportunity as the world grows to see the Ag business do well.

3 to 7 years out. He is positive but not so positive in the shorter term. USDA predicts 20-25% decline in cash receipts to farmers. Deer has already pulled back on sales to farmers. It is pretty beat up at this point. Look for an entry point at $81 and hope you get it at some point. Food product requirements in emerging markets will have to happen and that will lift Deere.

Wouldn’t own at this point. Until the end of 2013, there were huge tax advantages to the US farmers to buy new equipment. Those tax advantages are now gone. The company has also said that they think they are in for a couple of tough years of combine and tractor sales. It also looks like farmers income will be going down.

Has been looking at this and doing some work on it because it is not expensive. Trading at about 10X earnings. Good industrial that should do well where he can see reasonable growth in the US. He is looking for really good growth globally, which should help this company.

(A Top Pick March 13/13.) Sold his holdings on Aug 13/13 at $84.25. Replacement cycle seems to be topping and it could be choppy.

A Top Pick on May 8/13. He started to see a bit of a change. The replacement cycle started to look a little toppy. There have been a couple of very odd planting seasons. A super amount of moisture and then no moisture with drought conditions. That affected the habits of farmers, so he sold his holdings. Still a good long-term story, but there will be a much better entry point later.

One of his favorites. Would not buy here. He would buy it on further weakness. There is a long term need to feed the world. A leader in farm equipment. You could buy it if you are comfortable with it. Tax incentives to buy end in December. Farmers' income is done from last year.

Valuation is still compelling. Looks like we will have a really good crop year. Everyone is wondering when the party is going to end. Before the increase in corn prices they weren’t the best company in allocating their capital.

Share price and dividend on a 3-7 year time frame? If you are looking out 7 years, hopefully it is going to be higher. In the short term, we have had some great disappointments in 1) likely farmers’ income and 2) at the end of this year, a tax incentive that was supposed to come through last year but didn’t but was continued to this year. Once the tax incentive is removed, that is going to hurt new farm equipment sales. Also, the cost of renting the land and other input costs are going up. $88 would not be a bad entry point.

(BNN got their Past Top Pick dates wrong on today’s shows. I show the 3 Top Picks as being on July 25/12, not June 25/12. – Bill)

(Top Pick July 25/12. Up 15.5%.) There is a lot of misinformation. People think that when there is a drought that it is bad for the farmer. In fact when crop yields are down, crop prices are up. Also, farm insurance covers a lot of the losses. At 10X earnings it is good value.

Expensive to him, model $79.57, -5% differential. At a price where everything is price in. If it got down to $55.80 it would be a buy.

You might want to sell it. 1. You had the huge growth in farm receipts, originally forecast to be down 13% this year. 2. Incentives to buy farm equipment expired end of last year but were extended throughthis year. It will be a slow 2014 and there is angst to wet weather out west. Only half of crop has been planted. It is a great company with a great track record. They don’t have any visability beyond the second quarter so how can he.

(Top Pick April 12/12. Up 10.52%.)