Buffett’s Berkshire Takes a Stake in Deere
November 15, 2012 — According to various reports, Warren Buffett’s Berkshire Hathaway disclosed it had taken a stake in Deere & Co. and other companies that represent “basic” industries.
In addition to Deere, the world’s largest maker of farm equipment, the firm also purchased new stakes in Precision Castparts, a leading manufacturer of complex investment castings for aircraft engine, industrial gas turbine, airframe, and other applications. Buffett bought into WABCO, a maker of commercial vehicle braking, stability, suspension and transmission control systems.
While buying into leading industrial companies, Berkshire reduce consumer products stocks including Practer & Gamble, Kraft, VISA and Johnson & Johnson.
A report in Businessweek quotes Eli Lustgarten, an analyst for Longbow Research in Independence, Ohio, as saying Deere may benefit in coming decades as farmers seek to boost yields to feed a surging population. “We have a massive need to increase productivity in the farm belts of the world,” Lustgarten said. “Deere is the global leader” in making products to accomplish that. “Best technology, best-managed company.”
Deere, which reports fourth-quarter results next week, advanced 0.7% to $85.35 in extended trading yesterday in New York after Berkshire’s filing was released.
Berkshire held 3.98 million shares of the Moline, Illinois- based company at the end of the third quarter.
Deere traded (DE) as low as $72.85 in the three months ended September 30 and closed the quarter at $82.47. According to the Business Week report, the volatility may have given Berkshire a buying opportunity. Buffett, the world’s fourth-richest person, has said he built his fortune by investing in companies the market mispriced.
“The stock got hit a bit,” Lustgarten said. “The long- term outlook for Deere is what attracts people.”
The holding adds to Berkshire investments tied to agriculture. Buffett praised employees at CTB Inc., a unit that makes products for the hog and poultry industries, saying in 2010 that it would expand for decades and was on a farming “superhighway.” Buffett’s son Howard, a farmer and Berkshire director since 1993, endorsed the deal to buy CTB in 2002.