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

My 20 Favorites

American Eagle Outfitters	aeo	$22.03
Medtronic	mdt	$49.63
Harley Davidson	hog	$39.00
Tiffany & Co.	tif	$39.20
Abercrombie & Fitch	anf	$69.90
Hansen Natural	hans	$41.94
Dental Supply International	xray	$39.02
Stryker Corp.	syk	$65.54
Strayer Education	stra	$156.82
Biomet	bmet	$45.75
Patterson Companies	pdco	$35.52
Deckers Outdoor	deck	$117.01
General Electric	ge	$33.4482
Forest Labs	frx	$40.29
Zimmer Holdings	zmh	$76.16
Endo Pharm.	endp	$26.46
Global Payments	gpn	$40.30
American Ecology Corp.	ecol	$24.78
Buckle, Inc.	bke	$46.40
Coach, Inc.	coh	$30.91

Medtronic

Dear Diary,

Medtronic (MDT) is reported to have a current ratio of 1.89. While I'd like to see this ratio at 2 or higher, I can live with it until it drops to below 1.

"Value Line" reports the Lond Bond Yield at 4.4% this week.

Gene

Long Bond Yield

Dear Diary,

"Value Line" presents the 30 Year Treasury Bond Yield to be 4.28%.

I've narrowed my interest to 20 stocks out of about 2000 covered in "Value Line," for my Buffett purposes. I may list them in a few days. Per share earnings for the 20 is just a bit over 16% per annum on average, so we might expect as much as 40% compounded growth from the group, if I don't bother them too much. I've not yet invested in them, as a group.

Gene

Minor Conflict of Information

Dear Diary,

I am reading in my "Value Line Investment Survery" materials that the long bond (30 year treasury bond) appears to be trading at 4.12%, while the Federal Funds Rate is at 3%. This 1.12% difference in numbers is not anything that will cause any panic in my investment calculations, but it does give me pause that neither Warren Buffett nor David Clark, both of whom examined and commented on my work in the past, has ever drawn my attention to this difference. Hum.

I'm studying Hansen Natural (HANS) today. It presents flawless numbers in "Value Line." I'm calling for a financial report tomorrow. With projected earning per share for 2008 at $2.10 per share, I calculate a relative value to the Federal Funds Rate (3%) at $70.00. On the other hand, the 4.12% yield on the long bond discussed above would present a relative value to be $50.97. Warren believes the average of all interest rates is 10%, which offers a relative value of $21.00. HANS is trading at $38.00 per share and growing earnings at 45% per annum.

HANS is not a giant monopoly, so the closer to the 10% calculation I can get, the better.

Gene