Deere competes favorably against rival Caterpillar Inc. (NYSE:CAT) with its P/E at 11.36 ttm and a 2.50% yield. Quarterly earnings growth has been better at Deere, however at .10% versus -.17% for Caterpillar. In its favor, the PEG at .86 makes Caterpillar an undervalued name.
Although Caterpillar is the kind of respected American business Warren likes, its greater exposure to a volatile China takes it out of a more favored position than Deere & Company (NYSE:DE), despite a promising housing resurgence. Two other publicly traded stocks compete with Deere: Kubota Corp (ADR) (NYSE:KUB) and CNH Global NV (ADR) (NYSE:CNH).
When Deere reported in February it noted that agriculture and turf sales were up 16% while construction and forestry sales were down 7%. With Warren’s prescience he knew it was better to be less exposed to construction than with Caterpillar Inc. (NYSE:CAT) and have some agriculture exposure.
Despite the much lamented death of American family farms or is it dearth; Deere & Company (NYSE:DE) has managed to keep custom in the US with a financing arm, John Deere Capital Company, which grew revenues by almost $12 million for full year 2012 and by selling turf equipment, like those riding mowers so popular in the exurbs and equipment for golf courses.
Warren may not focus on socially responsible investing but he appreciates a company with a good reputation. Deere has made the Ethisphere Institute’s “World’s Most Ethical Companies” list for the seventh straight time and the Fortune 50 Most Admired Companies list.
We heart u 2, Warren!
Warren has given us a small indication, less than 1% of the portfolio, that agriculture is at the beginning of a bull market. Both Archer Daniels Midland Company (NYSE:ADM) and Deere & Company (NYSE:DE) fit very much in the Buffett mold: consistently growing dividends, solid longstanding businesses with growing demand, understandable business models, and American headquartered but global in nature.
Most importantly for Warren, he picked both up after a record drought when things looked their darkest. Just as Warren has finally tweeted his way into the 21st century these 19th century companies are already here.
The article Warren Is In The House originally appeared on Fool.com and is written by AnnaLisa Kraft.
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