Deere & Co.

Dear Diary,

It has been suggested that Deere & Co. (DE) might be worthy of my study.

In examination of Deere & Co. (DE), I find in the January 25, 2008 "Value Line" a Net Profit Margin under 10.0%, indicating no serious competitive advantage in products. This means that volume of sales and low cost of production are its strengths, much in the way Wal-Mart operates as the low cost operation to maintain market dominance.

Because DE is so large an operation, with overseas sales at 36% of revenues, the company appears protected from the low U. S. Dollar problems of late and can sustain a current ratio of less than 2, as it seems to know its fixed costs over its many decades of operation.

With a Net Profit of $2.1 billion projected in 2008 against Long term Debt of $1.9 billion, this ratio is in good order.

Both Return on Shareholder Equity and Return on Total Capital remain far above the 12% minimums, now in the mid 20% range.

Expected Earnings Per Share for 2008 are $4.75 and at the tail of an upward trend in earnings since 2001. With a 4.6% 30 Year Treasury Bond Yield, the Relative Value per share is $103.26, making the issue only slightly undervalued at the current $85 sale range. And with a P/E ratio at the high end of its average for the past several years, DE is a relative momentum play and not suitable for conservative investors seeking an entrance point into the issue. However, DE does appear to be in the middle of a long term sales growth period, with growing commodity prices in wheat, corn and the like driving earnings, due to the emerging bio fuel industry around the world.

I have no information on the ratio of Total Assets to Shareholder Equity, as yet.


Gene

My 20 Favorites

Dear Diary,

The February 29, 2008 30 Year Treasury Bond Yield is reported by "Value Line" to be 4.6%.

After more research, I've removed Forest Labs (FRX) and Biomet (BMET) from "My Favorite 20" because of their heavy reliance upon drug patents which wear out.

I also removed Patterson Companies (PDCO) due to a Net Profit Margin below 10.0%.

I added to "My 20 Favorites" Kinetic Concepts (KCI), Immucore, Inc. (BLUD) and Techne Corp. (TECH) to round out the list.

Name/ Symbol/ Expected '08 EPS/ Relative Value/ Current Price

1) Dental Supply/ XRAY/ $1.87/ $40.65/ $37.84
2) Stryker Corp./ SYK/ $2.90/ $63.04/ $61.96
3) Strayer Education/ STRA/ $5.00/ $108.70/ $156.87
4) Abercrombie & F/ ANF/ $6.00/ $130.43/ $74.57
5) Harley Davidson/ HOG/ $3.70/ $80.43/ $36.64
6) Medtronic/ MDT/ $3.00/ $65.22/ $48.61
7) Amer. Eagle O./ AEO/ $2.00/ $43.48/ $18.07
8) Hansen Natural/ HANS/ $2.10/ $45.65/ $41.99
9) Techne Corp./ TECH/ $2.45/ $53.26/ $67.14
10) Deckers Outdoor/ DECK/ $6.00/ $130.43/ $99.22
11) General Electric/ GE/ $2.50/ $54.35/ $34.16
12) Immucor, Inc./ BLUD/ $1.15/ $25.00/ $20.99
13) Kinetic Concepts/KCI/ $3.85/ $83.70/ $49.68
14) Zimmer Holdings/ ZMH/ $4.50/ $97.83/ $76.64
15) Endo Pharm./ ENDP/ $2.10/ $45.65/ $24.87
16) Global Payments/ GPN/ $1.90/ $41.30/ $39.37
17) American Ecology Corp./ECOL/ $1.20/ $26.09/ $24.87
18) Tiffany & Co./ TIF/ $2.60/ $56.52/ $37.77
19) Buckle, Inc./ BKE/ $2.50/ $54.37/ $45.44
20) Coach, Inc./ COH/ $2.05/ $44.57/ $28.44

"Strong Buy" on AEO

Dear Diary,

I just read on the news that "S&P" has a "strong buy" on AEO (American Eagle Outfitters) as Spring approaches. This is one of two of my major holdings.

Gene