Deere & Co – Quant Macro View
Deere & Co has been trending quite strongly on Stocktwits today given the decent old miss on earnings announced.
Taking a macro view of what is a genuine market leader in the Ag machinery space, this appears an opportunity to accumulate a very strong brand at a nearterm discount for those with an allocation horizon of a year or two.
We take the view that while Chinese folk may have enough empty dwellings and roads to nowhere for the time being, there is never really enough food. Global demographics ensure this, and with the US feeling the real impact of drought at present it may be time to buy with “blood in the paddocks”.
We see the stock currently below level 1 again on a knee jerk and heading for the lower oscillation band circa 71.50. With the div over 2.5% it pays the downside protection to the market risk line for the best part.
Volume is not giving anything away however there has been a little activity given it’s summer and all.
Please note that this chart was pulled from my Reuters terminal pre-market open and does not show last price but it is currently circa $74.00 just below level 1.
From a portfolio perspective a vote against an allocation in Deere & Co is akin to a vote against longer term US agricultural success, Monsanto and the power of US Agricultural tariffs and concessions. May see some drawdown granted, however longer term this thing is a beast and with water and food number one regardless of the global economic malaise it’s hard to see those making it more efficient to harvest losing out for too long with record low interest rates hardly an issue from a Capex perspective.
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