The stock market is made up of sectors. Some of them are in favor at any given moment. Others are out of favor. Buying out of favor sectors can lead to big gains when the trend shifts.
Investors can also sour on a sector that has performed well recently, on the logic that it may be time to change. But some sectors are less susceptible to change than others.
One such sector is agriculture. There’s always demand for food. And there are often many factors leading to higher or lower output for a given crop in a given year.
Yet fearful traders may be overlooking the opportunity in Deere (DE). The agricultural equipment manufacturer reported great earnings, and they increased their full-year guidance.
Shares are reasonably valued at under 14 times forward earnings, a discount of more than a third compared to the S&P 500.
Both earnings and revenues grew by over 30 percent in the past year. Even with a potential slowdown, that still looks like a bargain.
Action to take: Shares look like a reasonable long-term buy here. The stock also pays a 1.1 percent dividend yield.
For traders, a rebound from last week’s post-earnings selloff looks likely. The October $430 calls, last going for about $5.60, could see mid-double-digit returns in the coming weeks as shares trend higher.
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 of the companies mentioned in this article.