AGCO: Wait For a Pullback To Pounce On

| About: AGCO Corporation (AGCO)

If you live in North America, you've definitely heard of John Deere, and maybe of CNH -- but you may not have heard of AGCO Corp. (NYSE: AG) . While it's the world's third-largest manufacturer and distributor of tractors, combines and other agricultural machines, AGCO isn't well known here -- unless of course you're a farmer who's familiar with brand name tractors, including "Massey Ferguson." AGCO is focusing on Europe and South America, though it also sells its products in the Middle East, Africa and Asia.

This hasn't been a great year for AGCO, as weak years in Asia and North America have outweighed decent years elsewhere to produce lower revenues and significantly lower profits. The results were higher than expected in the third quarter, but still off of 2005 -- which was lower than 2004 -- and it's not clear when we can expect a turnaround.

I wouldn't blame AGCO for these results; the company is dependent on the profits and demands of farming, a business that is itself dependent on a number of variables, all notoriously unreliable. I do think AGCO is smart to be targeting South America and Eastern Europe, where there is extensive farmland with a need for better machines to improve efficiency. Asia could also be an area of strong growth in the future, and the company's acquisition of the Caterpillar Challenger will open doors to Caterpillar's extensive distribution network in America and around the world.

I think this is one to watch. AGCO is well run, has a very strong international presence, and the size to be competitive; if you can get it at the right price, it could grow nicely in your portfolio.

Type of stock: The third-largest manufacturer of agricultural equipment in the world.

Price target: I'd be wary of AGCO at the current price, which is just below the 52-week high of $32.26. It's possible the weak year will catch up with the stock price, and if the stock goes into the $20's, then I would pounce and buy shares as a long-term holding in your portfolio.

AGCO 1-yr chart: