Mine was same general approach, for Deere. Down 50% from 52 week highs. All I was hearing was negative. Low PE. Dominant market position.
Of course, DE and CSE are in different sectors of the equipment market. Deere almost all Ag equipment, CSE more construction. So they're not strictly comparable. There's certainly less downside buying a company that has already fallen a third to a half, compared to company making new highs. Of course, we don't have momentum on our side--so just sit and wait.
Decided on DE after investigating Agco, which has an even lower PE. Agco has shown great growth, but insiders sold last year (at higher numbers) and no one has come back in. I understand that with the Ag companies, dealer support is very important--and Deere's is reputed to be the best, while Agco's is subpar.
Interestingly, there's an important difference between the two sectors. Construction activity is clearly cyclical, and thus equipment can tend to last a bit longer through lean times. With farms, you plant the same amount every year--or at least people eat the same amount every year--and thus the equipment will wear out at the same rate each year. Thus, any decisions to defer purchase of new equipment will have some positive impact in later years. Thus (I think) ag equipment might tend to be more cyclical than construction. And prehaps that accounts for the differences in base PE.
Just some random thoughts. |
