John Deere a year ago traded about at 16X forward earnings. The stock price has doubled and it still trades at about 16X forwards earnings. Little to no earnings multiple expansion there. If your looking at a price to sales number that is a different story. You have gone from 1x sales to 2x sales. Shows the amount of operating leverage that is in the business. Though I rarely look at stocks that have the type of stock graph that Deere has it isn't crazy to think it could double again.
Another agriculture name that I have an interesting tidbit on is Mosaic. They sell seeds to farmers. I heard that a farmer in the midwest paid last year something like 250 per acre for seeds (I don't know the denomination seeds are sold in and if the lingo is correct) . Anyway Mosiac set the price at 400 this year. He apparently complained and Mosiac said if you don't want them, fine, we can ship it overseas tomorrow. Now that is pricing power.
I do not own either of these directly though both are represented in MOO. I am taking a close look at Deere trying to see if there is any margin of safety to the story. I am betting alot (have already made alot) that soft commodity prices will continue to go up over the next 12 months. Assuming that is right, what is the risk that Deere stock price goes down because of misses on the business front or major drought. etc Mosiac is interesting of course to but it is more expensive than Deere fundamentally, less diversified, and something I will only own through MOO.
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