My next big bet is on John Deere after doing quite a bit of research. I modeled in some earnings declines the next couple of year at 5% followed by pretty conservative growth after that. I also bought 2015 calls.
However this valuation really doesn't consider the huge upside going forward in Agriculture. It just doesn't make any sense that a company with a payout of 70% or so averaging 20% growth over the last 20 years sells at a PE of 9.
Anyways I think this company will outperform going forward.
My last big bet was COF in May up 19% to the markets 4% but I sold Terex to buy it. So I am only outperforming Terex since I sold it by about 2.5%. Terex stock has done a lot better than I expected given the information. Anyways I am much happier in COF over Terex.
I am also much happier owning Deere at the moment than Terex.
Hey James, which do you like more, COF or DE? Do you have 2 year price guestimates on them? I am seeing 2015 $4 EPS and $60 share price for TEX, but not enough confidence in those numbers to pull the trigger, yet. If i had a better handle on what TEX will earn in the out years it would be different. Can't seem to find my crystal ball.
I like COF a little more than DE. I would own both so I do!
Yes Terex $4 in 2015 seem appropriate. But there are risks to that for sure. $60 would be overvalued for Terex for $4 in 2015 unless they proved they could pay a nice 60-70% payout ratio (I include repurchases in the payout) and have 10% growth.