Seeking Alpha

ipahophead's  Instablog

ipahophead
Send Message
Just another guy attempting to fight monetary policy with my savings
  • Running In Circles Like A Cyclical Deere 0 comments
    Aug 13, 2014 6:23 PM | about stocks: DE

    Deere and Co (NYSE:DE) announced earnings today. They beat both top and bottom numbers but both were down (as expected) year-over-year.

    I agree with the case made by The Value Investor regarding the short- and long-term prospects of Deere. In short, Deere is in a cyclical business and sitting at or nearing the bottom of the cycle. The gloomy economic forecasts, forecasted higher interest rates, lower commodity prices, and potential return to recession all make it risk to buy right now.

    The 15 year FAST Graph is encouraging if the 2016 and beyond revenues can reverse the negative trend:

    (click to enlarge)

    IMO the 7 year graph is even more encouraging for long-term, buy-and-hold investors as it shows below-average PE even when looking at just the last five years:

    (click to enlarge)

    Obviously the continued lower estimates for future revenue and profit are weighing heavy on the stock.

    Although I bought five lots of Deere between 12/31/2013 and 2/18/2014 and sit at a full position, today I decided to add to my Deere commitment in two ways:

    1. Purchased another lot at $84.80 thus reducing my average share price to $87.71
    2. Wrote the December 2014 $82.50 puts at $2.50. Allowing for commission and the September dividend, the put pays 8.5% annualized over 129 days and provides a 5.6% discount at purchase compared to buying today. The break even is at $80.51

    So far I've been wrong on my timing to enter Deere; counting today's stock buy I'm down 3.7%. We will see how the puts works out in terms of free money or lower entry cost on my next Deere lot. Christmas might come a few days early this year for me and delivery a bunch of green-painted stock. :)

    Disclosure: The author is long DE.

    Stocks: DE
Back To ipahophead's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

  • I continue to be very long $FAST; wrote June 19 $40 puts for 10.8% annualized over 45 days; break-even at $39.47
    about 24 hours ago
  • Added to $HIW at $42.09. Fifth buy since 9/11/2014. Now at full underweight position.
    1 day ago
  • Opened new $LTC position today @ $42.05. Balance to $OHI, $VTR, $DOC, $MPW, & $HCP. These are all the healthcare REITs I plan to own
    1 day ago
More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.