Agriculture’s Wild Ride: John Deere Is Cheap But Risky

Source: iStock

John Deere (NYSE:DE) is a leading global manufacturer of agricultural machinery. It is a well-recognized and respected brand that in many ways is synonymous with quality American manufacturing. Considering that the global population is growing, which means that there should be an increase in global demand for food and agricultural commodities, investors might consider taking a position in John Deere, whose products aid farmers and allow them to produce more food at a lower price.

If you look at John Deere stock, it appears to be relatively inexpensive at less than 10 times earnings. Furthermore, a long-term chart reveals that the company has done an excellent job of creating shareholder value over the years. Management has increased the company’s dividend payout fairly regularly, and it has retired a lot of the outstanding shares so that each shares represents a bigger piece of the company.

For those looking to buy a position in an agricultural machinery company, Deere seems like the way to go. But for now, at least, I would be cautious, and I cite the following reasons as why.