With the markets in a choppy/consolidation mode (or perhaps worse), it's best to consider including a few defensive stocks in your portfolio. Deere and Co. (NYSE: DE) is worth an evaluation. Deere is well-positioned to take advantage of several long-term, secular trends. Chief among these are: strong international agricultural and international construction/building markets, and an expanding consumer equipment sales segment.
Solid, enduring growth in international agricultural markets is the standout fundamental here, with the business line's revenue growth expected to offset slumps in equipment sales for the correcting U.S. housing market. Other positives: DE's costs remain under control, its balance is strong, and agriculture equipment market conditions suggest the company has modest pricing power. Increased use of renewable fuels are likely to add to demand for DE's equipment, assuming at least one renewable fuel gains traction as a practical, affordable alternative to petroleum-based energy.
The qualifiers: DE's retirement benefit obligations are on analysts' radar screens, as is intensifying competition. The Reuters F2007/F2008 EPS consensus estimates for DE are $7.66/$9.34.
(Note: Technical analysis agnostics stop reading here; all others continue.)
Technically, Deere's chart looks very good. The stock's only breach of its 50-day moving average occurred during the August 2007 sell-off, and it's been above its 200-day moving average for about one year. DE's p/e of 19 is slightly high, but not outlandish, given the company's growth prospects.
Stock Analysis: Deere is a moderate-risk stock not suitable for low-risk investors. If your portfolio does not contain an agricultural /construction equipment stock, consider buying DE's shares. Sell / Stop Loss: $110. Note: don't buy DE if you already own Caterpillar (NYSE: CAT) or CNH Global (NYSE: CNH).
(Note: Technical analysis agnostics stop reading here; all others continue.)
Technically, Deere's chart looks very good. The stock's only breach of its 50-day moving average occurred during the August 2007 sell-off, and it's been above its 200-day moving average for about one year. DE's p/e of 19 is slightly high, but not outlandish, given the company's growth prospects.
Stock Analysis: Deere is a moderate-risk stock not suitable for low-risk investors. If your portfolio does not contain an agricultural /construction equipment stock, consider buying DE's shares. Sell / Stop Loss: $110. Note: don't buy DE if you already own Caterpillar (NYSE: CAT) or CNH Global (NYSE: CNH).
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Reader Comments (Page 1 of 1)
10-29-2007 @ 6:04PM
bobbi said...
Dear Joseph, please reply and tell me why not to buy De if one owns CAT? I look at CAT for construction, and DE for agricultural. Thanking you in advance.