Deere: Farming for Value

11/06/2014 8:00 am EST


I firmly believe in long run investing; those who hold on to their value stocks will be glad that they did, suggests value investor Russ Kaplan, editor of Heartland Advisor.

Commodity prices such as oil and agricultural products are trading at prices as low as they have been in a long time. This is being reflected in such stocks as John Deere (DE), which is trading near its yearly lows.

Deere is trading at a lower price because commodities such as corn are priced down so low that people in the agricultural industry are not buying as much of Deere's products.

Because this company is so financially solid and well managed, it presents us with a wonderful opportunity to buy Deere stock at bargain prices.

The important thing to remember about commodity prices is that they are running cyclical in value. Although they are currently at a low point, they will not stay down at those prices. History has shown us over and over that this is the case.

John Deere is trading in the low 80s and I believe it will be priced much higher in the future. Instead of looking at the price of corn, let’s examine important facts about John Deere.

It is a solid blue chip stock. Even though commodity prices have fallen, Deere has a healthy 34% return on equity, one of the highest among companies traded.

Will commodity prices and John Deere go lower? That is possible. Just remember that you should not be overly concerned with the short-term pricing.

Even with the company's stock being down in price, I do see it rising higher than it is now; and while you wait for that to happen, you can enjoy receiving a 2.9% dividend.

I would rather focus on the low price now rather than miss out on a big capital gain in the future because I waited for it to go down a few more points.

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