Why Deere Harvested Gains in 2012
2012 is nearing its end, and now's a good opportunity to look at what happened throughout the year to the stocks you follow. If you know the important things that a company achieved, as well as any challenges it failed to overcome, then you can make a better decision about whether it really deserves a spot in your portfolio.
Today, I'll look at Deere . The farm equipment manufacturer has enjoyed strong conditions in the agricultural sector in recent years, as high crop prices and steady demand have given farmers the disposable income they need to invest in capital expenditures like equipment. But this year's drought put a wrench into the farming industry. Below, you'll find more to explain what happened with shares of Deere this year.
Stats on Deere
Year-to-date stock return
Revenue, past 12 months
Net income, past 12 months
1-year revenue growth
1-year net income growth
Source: S&P Capital IQ.
Why did Deere keep growing in 2012?
Deere has pegged its success to the North American market, and so far, that strategy has worked well for it. Unlike competitor AGCO , which has big plans to move into emerging markets in Africa to boost sales, Deere has seen the proportion of its sales from outside its core U.S. and Canadian markets drop over the past year.
But Deere hasn't given up on international growth entirely. With its move to go beyond agriculture to build construction and forestry equipment, Deere is trying to diversify its offerings, going up more squarely against Caterpillar for the first time since the mining and construction machinery giant sold its agricultural equipment business to AGCO a decade ago. Although the summer's drought in the U.S. hurt Deere, its long-term goal of getting half its sales from outside Canada and the U.S. should reduce its vulnerability to weather events in specific markets.
Deere got a big vote of confidence last month from Berkshire Hathaway's Warren Buffett, as Berkshire added the stock to its portfolio during the third quarter. With Buffett moving away from more consumer-oriented giants, industrial stocks got beaten down during the summer, making Deere attractively valued with a good dividend to boot.
Deere has had a good 2012, and with no sign of lessening food demand, the company appears well-positioned to take advantage of prevailing trends in 2013 as well.
Can Deere win against Caterpillar?
If Deere truly wants to get into construction equipment, it'll have to deal with market-share leader Caterpillar. You can read all about Caterpillar's strengths and weaknesses in our brand new research report on the construction giant. Just click here to access it now.
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The article Why Deere Harvested Gains in 2012 originally appeared on Fool.com.Fool contributor Dan Caplinger owns shares of Berkshire Hathaway. You can follow him on Twitter @DanCaplinger. The Motley Fool owns shares of Berkshire Hathaway. Motley Fool newsletter services recommend Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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