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TIVP004: JOHN DEERE (DE): SOWING THE SEEDS OF GROWTH
W/ SHAWN O’MALLEY
26 January 2025
In today’s episode, Shawn O’Malley (@Shawn_OMalley_) breaks down John Deere, a company as American as Levi’s blue jeans and apple pie. John Deere is a fascinating business because it has survived for nearly two hundred years and remained an industry leader for much of that time, continually building their world-famous green-and-yellow tractors.
Deere is about much more than tractors, though, and you might be surprised to learn that its story is really about cutting-edge technology. Deere’s equipment is extremely sophisticated, and the company is working on autonomous tractors that may very well be the future of agriculture. After breaking down Deere’s business, Shawn shares his thoughts on the company’s valuation and his decision on whether to add it to The Intrinsic Value Portfolio he’s building each week on the show, plus so much more!
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IN THIS EPISODE, YOU’LL LEARN:
- How John Deere was founded.
- Why farmers love John Deere so much.
- How the company has embraced cutting-edge technology.
- Why subscriptions are enabling Deere’s business to be less cyclical.
- Where Deere stacks up against the competition.
- How to value a cyclical company.
- What to make of Deere’s seemingly large amount of debt.
- Whether Shawn thinks the stock is attractively valued.
- And much, much more!
TRANSCRIPT
Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.
[00:00:00] Shawn O’Malley: Hey, hey, welcome back to The Intrinsic Value Podcast. Last week, I broke down Ulta’s business model and valuation and concluded it was attractively priced enough to earn a spot in our Intrinsic Value Portfolio. Ulta’s the first addition to the portfolio that I’ll be building each week on the show, so if you missed that episode, make sure to go back and listen to it.
[00:00:21] Shawn O’Malley: This week, I’m taking a look at John Deere, an all American company that’s been around for almost 200 years. Whether you live in a city, the suburbs, or the countryside, I’m sure you are familiar with John Deere and their iconic tractors. As boring as that might sound, I think you’ll be pleasantly surprised to learn that John Deere is so much more than an equipment manufacturing business.
[00:00:41] Shawn O’Malley: In fact, John Deere is very much a tech company, in some ways, as well as a financial services company. It’s actually a fascinating business model and one that has historically been quite cyclical given its dependence on spending fluctuations on new equipment and agriculture. But the company is in the process of trying to tamp down that cyclicality, which could make its earnings much steadier.
[00:01:02] Shawn O’Malley: I’ll go through the nuances of this stalwart brand’s business and, as always, try to estimate its fair value at the end of the episode and decide whether or not it deserves a place in the intrinsic value portfolio at current valuation levels. So let’s dive into the story of John Deere, a company as American as apple pie and Levi jeans.
[00:01:24] Intro: You’re listening to The Intrinsic Value Podcast by The Investor’s Podcast Network. Since 2014, with over 180 million downloads, we’ve learned directly from the world’s best investors. Now, we’re applying those lessons to analyze businesses and investment opportunities every week, helping you uncover intrinsic value. Now for your host, Shawn O’Malley.
[00:01:56] Shawn O’Malley: This week I’m breaking down John Deere to see if the expression nothing runs like a John Deere can apply to its stock too. This is a company that’s synonymous with agriculture and blue collar work, yet it’s so much more than that. I was blown away by the technology in its equipment, on top of the attractive economics of its subscription based services and lending business.
[00:02:18] Shawn O’Malley: John Deere has a story almost as old as America itself, dating back to the 1830s. I can think of few other examples of companies that have not only been around so long, but remain at the top of their respective industries too. Across the backroads of America and throughout the world, John Deere is a trusted brand.
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