Deere & Co. (DE)

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%.)

(A Top Pick July 25/12. Up 17.70%.) Crop yields look like they are going to be lower which means crop prices are going to be higher. Crop insurance covers off the farmer. Also, international markets are very strong for this company.

Large and successful company selling into agriculture area. Benefited in the last years from resurgence in agriculture. Were hurt by weak corn prices but generally as a long term hold, this is one of the better way to play this trend. This trend is one he believes in. They have exposure in South America. The improving US economy will benefit them.

South America will be a very good catalyst for them. Crop insurance in the US helped the farmer. 50% farm equipment.

Producing a lot of cash and capital allocation is a very, very big topic of conversation in corporate America right now. You can expect that the dividend will grow at a fairly rapid rate. We are embarking on a time when there is greater and greater need to increase planted acreage. 2.2% dividend yield.

CAT reported big earnings and are in the same sector. Sometimes there is a couple of trading days and then the correction starts in the sector. Thinks it will remain in a trading range. Sometime over the next couple of months.

(Top Pick Nov 23/11, Up 13.73%) Missed on some expenses. A good long term secular story. Farmers are doing well even with the drought.

(Market Call Minute.) This is one she is looking to add if things play out in the fall.