Bill Gates significantly upped his investment recently in Deere (NYSE:DE) and Ecolab through his investment vehicle, Cascade Investments according to recent 13D filings. There are some compelling reasons to look at them as attractive investments.
Deere (DE) – “Deere & Company provides products and services primarily for agriculture and forestry worldwide. The company operates in three segments: Agriculture and Turf, Construction and Forestry, and Credit.” (Business Description from Yahoo Finance)
5 reasons to like DE at around $75 a share:
2. It has crushed earnings estimates each of the last four quarters and consensus estimates for 2011 and 2012 have risen smartly over the past three months.
3. It is good play on the long term secular trend of the increasing demand for food as the emerging markets developed. It is one Jim Rogers’ key holdings on this long term Ag play as well.
4. S&P predicts Deere will grow earnings an average of 22% annually and it is selling at less than 12 times this year’s projected earnings and a five year projected PEG of just 1.
5. Credit Suisse has a $91 price target on Deere and the median consensus analyst estimate is $104
Prognosis: I think Deere is a buy at $75, but I would probably try to enter the stock cheaper by selling the October 75 puts on DE at $4.60.
Ecolab (NYSE:ECL) – “Ecolab Inc. develops and markets products and services for the hospitality, foodservice, healthcare, and industrial markets primarily in the United States. It provides cleaning and sanitizing products and programs, as well as pest elimination, maintenance, and repair services primarily to customers in the foodservice, food and beverage processing, hospitality, healthcare, government and education, retail, textile care, commercial facilities management, and vehicle wash sectors.” (Business description from Yahoo Finance)
5 reasons to recommend ECL at $50 a share:
2. In addition to Cascade Investments increasing their stake, Munder Capital has picked up almost 2mm shares over the last few months.
3. Ecolab has a low beta (.69), an A rated balance sheet and S&P predicts it will average 15% growth over the next three years.
4. The recently announced merger with Nalco Holdings should significantly expand revenues and improve margins over the long term.
5. Consensus median analyst on Ecolab is $58.25 currently.
Prognosis: Ecolab looks like a decent long term buy, but I would hold off and hope it pulls back to its support level $45 before I would pick up shares.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in DE over the next 72 hours.