DE - John Deere

[dabuff]

http://www.thestreet.com/story/13062925/1/warren-buffett-dishes-on-ibm-deere-and-heading-berkshire-hathaway-for-50-years.html

[ZenaidaMacroura]

An Elephant For Berkshire, Or Rather a Deere

 

http://delphivalueinvestments.blogspot.com/2016/05/an-elephant-for-berkshire-or-rather.html

 

Quick little blog post on the chances of Deere being purchased by Berkshire. Seems like a business Buffett would like to own over the long-term. If the board is open to an offer maybe it could happen.

 

I saw you at the Markel brunch!  Great write up -do you think that Deere has a lot of use for incremental capital?  It seems to be the theme of his acquisitions lately.

[Bme3412]

interesting to note that SiteOne Landscape Supply (SITE), which was carved out from John Deere by LBO firm CD&R, is IPO'ing this week. SITE is a wholesale distributor of landscape supplies. The business model: SITE is a one-stop shop for professional landscapers that supplies fertilizer, irrigation, nursery products, landscape accessories, etc. Makes sense - it would be uneconomical for professional landscapers (low-volume, location-based business) to go straight to the suppliers of landscaping supplies/resources (high volume, commodity business).

 

SITE operates a branch network of 477 locations across the US and parts of Canada. Branches are located near residential areas and highways. At each branch network is a facility (not owned by SITE, they are leased, with 3-5 year terms), with outside storage yards averaging 10k to 20k sq feet. Professional landscapers pay SITE to procure and deliver the supplies.

 

The financial return profile is 5-7% organic growth, mid-teens incremental margins, acquisitions add a few % points as well. SITE had intended to IPO before but pulled the offering due to market uncertainty.

 

It's an interesting case study. SITE is consolidating the market and has leading market share within a very fragmented market (9% share, $16bn TAM, 4x as large as the next competitor). Again, this is a location-based business, which is important to point out.

 

We ultimately took a pass, as barriers to entry are virtually nonexistent, the business is highly seasonal, float will be low (~35%), heavy debt load, unproven management, etc.

[JayGatsby]

Does anyone follow this company? I know the source could put a negative spin on sunshine and unicorns, but this article brings up some interesting points: http://www.zerohedge.com/news/2017-07-18/farmers-go-broke-john-deere-ramps-its-captive-financing-operation-keep-ag-party-goin

 

Seems to raise a lot of the same criticisms that people have re GM, but rather than trading at a PE of 5 like GM it trades at a PE of 24 after a big run-up this year.

[rb]

Anyone have any idea what's going on with this? It's had a massive run this year and now it's trading at Google levels. Am I missing something or is it just way overvalued?

[bizaro86]

DE is a relatively significant ARK pick and their assets have been growing fast. It probably also pulls in some copycat money.

[longlake95]

Anyone have any idea what's going on with this? It's had a massive run this year and now it's trading at Google levels. Am I missing something or is it just way overvalued?

 

Ya, the Ag cycle maybe turning for the better. Pull up a chart of corn, soybean etc... when farmers have cash they buy equipment.

 

Have a look at CERV. i own some. Deere dealerships in Canada.