Pimco's Kashkari: John Deere Stock Look Good Right Now

Monday, 15 Oct 2012 10:50 AM

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Investors looking for a good stock should consider agriculture equipment manufacturer John Deere, said Neel Kashkari, managing director of fund giant Pimco.

The agricultural sector is looking solid thanks to high corn and other commodity prices, plus John Deere’s company fundamentals appear solid as well, including seasonal factors and its ability to pay investors dividends.

“John Deere is trading around 10 times earnings, has a 2.2 percent dividend yield. John Deere’s stock tends to have a cyclicality where it tends to do better in the fall and winter months, but we think it’s great long-term holding,” Kashkari told CNBC.

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“Corn prices are obviously high, there’s a lot of capital to invest in the ag sector, and if you look globally ag markets are in desperate need of modernization, and we think John Deere is very well positioned to deliver that,” Kashkari added.

“John Deere is not only a great premium brand in America, it’s a great premium brand in agricultural markets around the world, so that’s a long-term holding for us that we think will play out very well over the next few years.”

Other companies in the sector like Caterpillar are more exposed to the cooling Chinese economy, while John Deere appears to be on more solid ground.

“Deere is more of an American play with the upside of the emerging markets,” Kashkari said.

“We have to watch the ag markets all around the world, but we think Deere is better positioned than Caterpillar to capitalize on growth in the near term.”

Caterpillar recently cut its 2015 earnings growth estimates to $12 to $18 per share from $15 to $20 per share.

“We’ve seen a slowing in economic growth more than we expected,” Caterpillar CEO Doug Oberhelman told analysts and reporters recently, according to Reuters.

“We expect fairly anemic and modest growth through 2015.”

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