Every industry can go in and out of favor with the markets. And every industry has its peaks and troughs at different times. Investors who pick up shares of industry-leading companies during a trough can see substantial returns over time.
But the key is over time. A changing cycle takes time to play out, and may not even be noticeable at first. A great company will likely be able to start trending higher before the cycle becomes clear.
For instance, agriculture has been a poorly-performing sector for some time. That’s in spite of the investment needed to till land, grow and harvest crops, and safely bring them to market.
Yet better-than-expected results from machinery producer Deere (DE) could be a sign of an out-of-favor cycle turning around.
Deere is still coming off a tough year, where earnings growth sank 40% and revenues declined by 17%. But Deere is a leading producer of farm equipment, and even creating AI-powered tools to help farmers get the best yield and returns out of their crops.
Action to take: Long-term investors may like shares here, which have significantly underperformed the market and trade at 16 times forward earnings. Deere also pays a 1.5% dividend.
For traders, the January 2025 $470 calls, last trading for about $5.90, could see mid-double-digit returns on a further uptrend higher into the start of next year.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.