Value Investing

Vladimir Dimitrov, CFA

Equity Bottom-Up

<ul>
<li>Deere's share price performance continues to disappoint since I first warned about valuation related risks.</li>
<li>It appears that the cyclical nature of the industry is suddenly a non-issue for Deere's valuation.</li>
<li>As momentum trade fades, Deere's share price is likely to experience further downside pressure.</li>
</ul>


Deere's share price performance continues to disappoint since I first warned about valuation related risks.
It appears that the cyclical nature of the industry is suddenly a non-issue for Deere's valuation.
As momentum trade fades, Deere's share price is likely to experience further downside pressure.


Deere: When Momentum Trade Hijacks The Valuation

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

On Friday post market close, S&amp;P Dow Jones announced the results of the September review for the <a href="https://www.smartkarma.com/entities/s-p-500" target="_blank" data-smartkarma-citation="entities:22886:1" rel="noopener">S&amp;P 500 (SPX INDEX)</a> that will be effective after the close of trading on 17 September.There are 3 inclusion -  <a href="https://www.smartkarma.com/entities/match-group-inc" target="_blank" data-smartkarma-citation="entities:25903:1" rel="noopener">Match Group Inc (MTCH US)</a>, <a href="https://www.smartkarma.com/entities/ceridian-hcm-holding-inc" target="_blank" data-smartkarma-citation="entities:27122:1" rel="noopener">Ceridian HCM Holding Inc (CDAY US)</a> and <a href="https://www.smartkarma.com/entities/brown-brown-inc" target="_blank" data-smartkarma-citation="entities:19532:1" rel="noopener">Brown &amp; Brown (BRO US)</a>, while the exclusions are <a href="https://www.smartkarma.com/entities/unum-group" target="_blank" data-smartkarma-citation="entities:2521:1" rel="noopener">Unum Group (UNM US)</a>, <a href="https://www.smartkarma.com/entities/national-oilwell-varco-inc" target="_blank" data-smartkarma-citation="entities:3046:1" rel="noopener">National Oilwell Varco (NOV US)</a> and <a href="https://www.smartkarma.com/entities/perrigo-co-plc" target="_blank" data-smartkarma-citation="entities:869:1" rel="noopener">Perrigo Co Plc (PRGO US)</a>.There are inclusions/exclusions to the S&amp;P MidCap 400 and the S&amp;P SmallCap 600 as well.The stocks with the largest impact from passive buying are <a href="https://www.smartkarma.com/entities/match-group-inc" target="_blank" data-smartkarma-citation="entities:25903:1" rel="noopener">Match Group Inc (MTCH US)</a>, <a href="https://www.smartkarma.com/entities/tandem-diabetes-care-inc" target="_blank" data-smartkarma-citation="entities:20893:1" rel="noopener">Tandem Diabetes Care (TNDM US)</a>, <a href="https://www.smartkarma.com/entities/brown-brown-inc" target="_blank" data-smartkarma-citation="entities:19532:1" rel="noopener">Brown &amp; Brown (BRO US)</a>, UniqureNV (QURE US) and <a href="https://www.smartkarma.com/entities/ceridian-hcm-holding-inc" target="_blank" data-smartkarma-citation="entities:27122:1" rel="noopener">Ceridian HCM Holding Inc (CDAY US)</a>.The stocks with the largest impact from passive selling are <a href="https://www.smartkarma.com/entities/united-insurance-holdings-corp" target="_blank" data-smartkarma-citation="entities:19222:1" rel="noopener">United Insurance Holdings (UIHC US)</a>, <a href="https://www.smartkarma.com/entities/team-inc" target="_blank" data-smartkarma-citation="entities:6811:1" rel="noopener">Team Inc (TISI US)</a>, <a href="https://www.smartkarma.com/entities/unum-group" target="_blank" data-smartkarma-citation="entities:2521:1" rel="noopener">Unum Group (UNM US)</a>, <a href="https://www.smartkarma.com/entities/perrigo-co-plc" target="_blank" data-smartkarma-citation="entities:869:1" rel="noopener">Perrigo Co Plc (PRGO US)</a> and <a href="https://www.smartkarma.com/entities/national-oilwell-varco-inc" target="_blank" data-smartkarma-citation="entities:3046:1" rel="noopener">National Oilwell Varco (NOV US)</a>.There are a lot of other stocks that will have a lot to buy/sell from passive funds due to changes in the number of shares and free float and due to funding flows.

On Friday post market close, S&amp;P Dow Jones announced the results of the September review for the S&amp;P 500 (SPX INDEX) that will be effective after the close of trading on 17 September.There are 3 inclusion -  Match Group Inc (MTCH US), Ceridian HCM Holding Inc (CDAY US) and Brown &amp; Brown (BRO US), while the exclusions are Unum Group (UNM US), National Oilwell Varco (NOV US) and Perrigo Co Plc (PRGO US).There are inclusions/exclusions to the S&amp;P MidCap 400 and the S&amp;P SmallCap 600 as well.The stocks with the largest impact from passive buying are Match Group Inc (MTCH US), Tandem Diabetes Care (TNDM US), Brown &amp; Brown (BRO US), UniqureNV (QURE US) and Ceridian HCM Holding Inc (CDAY US).The stocks with the largest impact from passive selling are United Insurance Holdings (UIHC US), Team Inc (TISI US), Unum Group (UNM US), Perrigo Co Plc (PRGO US) and National Oilwell Varco (NOV US).There are a lot of other stocks that will have a lot to buy/sell from passive funds due to changes in the number of shares and free float and due to funding flows.

S&P500 Index Rebalance: Swiping Right on Match

Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

Baptista Research is an independent financial research house focused on the U.S. markets. We provide equity research as well as credit research reports on the top-listed U.S. companies with most of our focus on technology, consumer goods and services, automobiles, industrials, oil and gas, pharma, and healthcare. Our research has served more than 3000 institutional investors including mutual funds, hedge funds, banks, family offices, and various buy-side firms. We operate a research subscription service where institutions, as well as retail investors, can have priority access to all our research. We also have a wide distribution of our research reports across some of the top global financial platforms. Apart from equity research and credit research, we also provide advisory services with respect to mergers & acquisitions (M&A), private equity/ venture capital fundraising, valuation reports, and investment management services for corporates.
Baptista Research is owned and managed by Ishan Majumdar, an ex-Venture Capitalist/ Investment Banker, a Chartered Accountant, and a Masters’ degree holder in Management from HEC Paris. Ishan has nearly a decade of experience in Mergers and Acquisitions, Leveraged Buyouts (LBOs), Venture Capital Investing, Corporate Strategy, and Valuation in front-office roles at the likes of BNP Paribas CIB, Credit Agricole CIB, Groupe Danone, and TIW Private Equity. He has worked on and closed multiple acquisition deals, leveraged buyouts, and start-up investment transactions.

Equity Capital Markets

<ul><li>Deere & Company delivered a stellar quarter and has already achieved the target price from our last report.</li><li>Their net sales grew by a staggering 29% to $11.5 billion, with the core Equipment Operations business growing 32% to $10.4 billion.</li><li>We maintain our 'Hold' rating on the stock with a revised target price.</li></ul>

Deere & Company delivered a stellar quarter and has already achieved the target price from our last report.Their net sales grew by a staggering 29% to $11.5 billion, with the core Equipment Operations business growing 32% to $10.4 billion.We maintain our 'Hold' rating on the stock with a revised target price.

Latest News from the World’s Leading Innovators

Granite Bay Capital

An innovation focussed investment company

Granite Bay Capital is an innovation focussed investment company with a deep focus on the companies at the leading edge of innovation across major themes such as AI, ubiquitous computing, sustainability, automation and longevity.

Thematic (Sector/Industry)

Headline Developments On the back of the Epic v Apple case, documents were released highlighting that Google (GOOG) had considered buying Epic outright.  During the case, Epic Games outlined Google’s plans to develop “a series of internal projects to address the ‘contagion’ it perceived from efforts by Epic and others to offer consumers and developers competitive alternatives and has even contemplated buying some or all of Epic to squelch this threat”.

Headline Developments On the back of the Epic v Apple case, documents were released highlighting that Google (GOOG) had considered buying Epic outright.  During the case, Epic Games outlined Google’s plans to develop “a series of internal projects to address the ‘contagion’ it perceived from efforts by Epic and others to offer consumers and developers competitive alternatives and has even contemplated buying some or all of Epic to squelch this threat”.

<ul>
<li>There is a reason why share price performance over the recent months is not surprising, even after taking into account improving fundamentals.</li>
<li>In spite of the exciting narrative around connected vehicles, Deere's business is still largely driven by cyclical macroeconomic factors.</li>
<li>Free Cash Flow will likely experience downward pressure over the coming quarters which would make matters worse.</li>
</ul>


There is a reason why share price performance over the recent months is not surprising, even after taking into account improving fundamentals.
In spite of the exciting narrative around connected vehicles, Deere's business is still largely driven by cyclical macroeconomic factors.
Free Cash Flow will likely experience downward pressure over the coming quarters which would make matters worse.


United States

Deere & Company manufactures and distributes a range of agricultural, construction and forestry, and commercial and consumer equipment.  The Company supplies replacement parts for its own products and for those of other manufacturers. Deere also provides product and parts financing services. Deere and Company extends its services and products worldwide.

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Deere & Co (DE US)

Deere: When Momentum Trade Hijacks The Valuation

Deere's share price performance continues to disappoint since I first warned about valuation related risks. It appears that the cyclical nature of...

Vladimir Dimitrov, CFA

S&P500 Index Rebalance: Swiping Right on Match

There are 3 changes to the S&P500 that will be implemented at the close on 17 Sep. There are changes to the S&P400 & S&P600 as well. There will be...

Brian Freitas

Deere & Company - Investment Thesis

Deere & Company delivered a stellar quarter and has already achieved the target price from our last report. Their net sales grew by a...

Baptista Research

Weekly Innovation Review (WIRE) #44

Headline Developments On the back of the Epic v Apple case, documents were released highlighting that Google (GOOG) had considered buying Epic...

Granite Bay Capital

Is Deere & Co Really Going Into Space

There is a reason why share price performance over the recent months is not surprising, even after taking into account improving fundamentals. In...

Vladimir Dimitrov, CFA

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