Warren Buffett Displays His Investing Genius Once Again

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By Jacob Maslow

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It is really hard to hate on Warren Buffett. It truly is. This man is just one phenomenal investing machine. He is able to see opportunities when people see only risk and danger. He is able to see profit when other otherwise gifted investors and analysts see loss or potential loss.

Take the case of John Deere (NYSE:DE). In recent filings, Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A) took a position in the venerable manufacturer of farm machinery. When it comes to tractors, combines, or harvesters, John Deere is one of the most solid names in the industry. It has a very solid history of providing farmers and agribusinesses with the equipment and machinery they need to boost their productivity and efficiency. Well, it appears that Wall Street hasn’t exactly been bullish on Deere lately. The stock has pretty much traded sideways for the past four years. Moreover, many Wall Street analysts are looking at this stock as potentially something that isn’t going to add much value for your portfolio.

They are not saying that you should sell it. If you already find yourself with John Deere stocks, the consensus analyst opinion is that you should just hold on to that stock. The consensus estimate regarding the stock’s value is that John Deere will probably be worth $85.35 in around 18 months. That is bad news. Why? That is around 8% down the stock’s current price.

Despite all these criticism and negative signs, this is a tremendous opportunity to recognize the investing genius of Warren Buffett. You have to understand that Mr. Buffett doesn’t invest in a stock because he wants to unload the stock tomorrow, two months from now, or even two years from now. He has made it clear that he only makes moves if he truly believes in the long-term potential of the company. This is how he was able to lock in on turkeys right before they became eagles. This is how he locks in on pieces of coal before they turn into diamonds. He is all about fundamental investing. He is all about looking at the fundamental value of a company and ending it applying a long timeline.

I truly think Mr. Buffett is right on the money on this count. John Deere is one of the most solid companies in its industry. If anything, it can be ripe for a takeover if it continues to stagnate. However, I think the exit strategy for John Deere is more profitable than that. I suspect that, from a fundamental perspective, John Deere is worth investing in.

Regardless, Mr. Buffett put his money where his mouth is, and I wouldn’t be surprised if this piece of coal starts looking like a diamond a few years from now. Here is a clue. John Deere’s stock is trading only at 11 times its earnings. Compare this with the average stock’s 18 multiple.

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