Should You Invest in Deere and Company?

PHOTO CREDIT: Deere and Company

OVERVIEW

Deere and Company is a company based in the United States. The company designs, manufactures, and sells a wide range of equipment used in agriculture, foresting, and several other industries. The company offers several other financial and maintenance services for these products as well. The company was founded in 1837.

Why You Should?

1. Deere and Company is a great reopening play in an investor’s portfolio. The company saw a drop in demand for many products as the construction and parts of the agriculture sector shut down. However, once this pandemic is over, the company will see strong growth across all of its product categories once again.
2. Deere and Company will see some benefits from a Biden administration. Biden looks to end some geopolitical tensions between China and the US, something that can help increase the price of agricultural commodities and lower raw material costs for the company. Increased spending on infrastructure will also benefit the company and its investors.
3. Deere and Company saw sales tank in certain categories over the past couple of years as the price of agricultural commodities like soybeans fell. However, there seems to be a strong turnaround in agriculture caused by the reopening of this pandemic. This has given farmers more money and the financial ability to purchase new farm equipment.
4. Deere and Company continue to invest heavily into its core business. For example, the company has been investing heavily in clean-energy-based farm equipment and adding levels of autonomy into its equipment to increase the productivity of farmers around the world. These innovations will further boost the company’s sales and will also benefit investors in the company.

Why You Should Not?

1. The company faces tough competition in the heavy equipment industry. Some of these competitors include Caterpillar, Komatsu, and many others. This competition might hurt the company and its investors in the future.
2. Deere and Company have been plagued by a wide range of supply chain issues and rising costs. The company is unable to acquire critical components like semiconductor chips for its products. It has had to also pay far more for raw materials like steel and other services like transportation and freight. These supply chain issues will hurt the company in the short to mid-term.
3. Deere and Company have been negatively impacted by geopolitical tensions (like the US and China trade war) in the past. This specific event cause a sharp increase in the production costs for the company and also led to weak demand as farmers across the nation were negatively impacted by these trade policies. This also hurt investors in the company.

MY OPINION

I think that Deere and Company is a great long-term investment due to its position as a good reopening play, positive impacts from the Biden administration, a strengthening farm industry, as well as continued innovation into its core products. However, tough competition, negative impacts from supply chain issues, as well as a level of geopolitical risk might hurt the company and its investors.