Recent Buy

The stock market has recovered and then some since the drop in October. Even though fair valued stocks are few and far between, one of my holdings is still attractively priced. I added 28 shares to my position in Deere & Co at the price of 85,50 dollars yesterday.

For those of you that are not familiar with the company, Deere & Company manufactures and sells agricultural, forestry and construction machinery, as well as offers financing through its extensive network of dealers.

Here Is a Number Of Reasons Why I Like The Company

• Long operating and dividend history (been around for 175 years and distributed dividend 77 of these)
• A dividend growth of 16% over the past 10 years on average.
• An EPS growth that has exceeded the dividend growth by a margin over the same period.
• Deere & Co is the market leader in it's home market and in it's main segment.
• Strong Brand. The John Deere brand is strong and tighly associated in peoples minds with agricultural machinery in general, and tractors particular, and has been so for decades.
• Strong customer relations. The company has been around for almost 180 years, and has over that period of time managed to build an impressive network of dealers and customers that can not replicate overnight.
• A large portion of Deere & Company's revenues come from the aftermarket (used machines, spare parts and service) as well as financing activities, which reduce fluctuations in profitability.
• A Payout Ratio below 30%
• Attractive valuation in a market where good value is hard to find.

Valuation

The price I paid is the equivalent to my Price Cap of $85,5 dollars. My Price Cap is based on the following assumptions:

• I estimate that Deere & Co will have an average dividend growth rate equivalent to about 12,5% going forward.
• I deem sustainable EPS to be roughly 6.5 dollars and sustainable P/E-Ratio to be 14.

After the purchase our passive income is approximately 2340 dollars on a annual basis. You can find my latest portfolio allocation in the main menu.

I plan, in a not to distant future, to post a longer analysis about Deere & Company. Until then have ha nice day!