Who knows what'll actually happen over the next couple of years, but I for one would find it amusing if all the ethanol bulls had already moved on to the next new "can't miss" idea by the time a lot of this ethanol chatter comes true. And while the classic "buy the rumor, sell the news" has pushed up a lot of ethanol plays, an idea like Deere
I haven't been the biggest bull on Deere recently, mostly because I thought CNH
The bad news about Deere's recent quarter is that it wasn't very strong overall. The good news is that nobody thought it would be. Sales were up 2% (down 1% excluding currency) as good growth in the construction and commercial/consumer businesses were offset by a 7% decline in the agriculture business (which accounted for about half of all sales).
Likewise, there was good news/bad news on the operating side of the ledger. Equipment segment operating profits were down, as was overall income from continuing operations. But given the extent to which operating leverage can cut both ways, I thought Deere did pretty well in terms of maintaining margins. And given no immediate expectations of a dramatic turnaround in the agriculture business, the company is continuing with plans to more efficiently manage working capital by cutting inventories and receivables in that business.
Deere isn't quite my idea of a dirt-cheap dream stock, but it's not overpriced. And that makes it pretty rare when you look at the likes of Archer Daniels Midland
Ultimately ethanol will play out -- there are simply too many forces lined up in its favor, barring a drop in oil to $20 a barrel. It's just a case now of being patient enough to let reality catch up to hope and finding those stocks that haven't been overinflated on hype and hope.
For more agrarian Foolishness:
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).