Stock Pick of the Week

THIS WEEK’S PICK: John Deere

About: John Deere is the brand name of Deere & Company, an American corporation that manufactures agricultural, construction, and forestry machinery, diesel engines, drivetrains used in heavy equipment, and lawn care equipment.

Wian van Wyk, Momentum Securities Portfolio Manager for the Johannesburg region, shares his insights.

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Transcription:

Good day and welcome to Momentum Securities’ Stock Pick of the Week. Deere & Company or better known by one of their brand names, John Deere, is one of the world's leading manufacturers in agriculture, construction, and forestry equipment.

Based on recent increases seen in agricultural commodity prices and improved construction sector, as well as investment in precision agriculture, we expect Deere & Company to benefit from this in the near future.

According to the US Department of Agriculture, farming net income is anticipated to increase by more than 15% in the current year, the highest it has been since 2013. The primary driver of this being increased prices in agriculture, commodities, and strong import demand, seen from China throughout the year. The increase income should result in encouragement to farmers to increase spending on new agricultural equipment and replacing of aging fleet, ultimately increasing Deere & Company's top line.

Further to this, Deere & Company is well-positioned for long-term growth, backed by increased investment in spending for advanced farming technology, as the company envisions revolutionising technology for automated form.

Based on these factors, we are comfortable to maintain the current 2.8% allocation of Deere & Company within our global equity portfolio.