Here’s Why LRT Capital Management Invested in Deere & Company (DE)

LRT Capital Management, an investment management firm, released its July month 2022 investor letter. A copy of the same can be downloaded here. As of August 1, 2022, the fund’s net exposure was approximately 67.37% and the beta-adjusted exposure was 45.31%. In addition, you can check the top 5 holdings of the fund to know its best picks in 2022.

LRT Capital Management discussed stocks like Deere & Company (NYSE:DE) in the investor letter. Headquartered in Moline, Illinois, Deere & Company (NYSE:DE) is an agricultural equipment and machinery manufacturer and distributor. On September 9, 2022, Deere & Company (NYSE:DE) stock closed at $372.25 per share. One-month return of Deere & Company (NYSE:DE) was 1.69% and its shares gained 2.97% of their value over the last 52 weeks.  Deere & Company (NYSE:DE) has a market capitalization of $113.773 billion.

Here is what LRT Capital Management specifically said about Deere & Company (NYSE:DE) in its Q2 2022 investor letter:

“Deere & Company (NYSE:DE) manufactures machines and equipment, which help the agriculture and construction industries. The company’s production and precision agriculture segment manufacture global equipment and technology solutions for production-scale growers of large grains, small grains, cotton, and sugar. The small agriculture and turf segment develops equipment for dairy and livestock producers, crop producers, and turf and utility customers. Finally, the construction and forestry segment make a range of machines for the earthmoving, forestry, and roadbuilding production systems.

The company is the leader in farming and agricultural equipment and competes with the likes of CNH Industrial and Kubota Corporation. Deere has generated returns on equity of over 20%, and in many years well above 30%, for more than two decades. How is this possible when the company’s end markets are so cyclical?

Deere sells an “ongoing relationship” to farmers, as every piece of equipment purchased leads to a steady supply of future parts and related services. The true source of Deere’s competitive advantage is the company’s dealership network, and its ability and willingness to finance the purchase of its equipment for farmers. The unique nature of its distribution system and the credit decisions that are made at the distributor level have created a structure that has allowed the company to keep credit losses to astonishingly low levels.”

Nejron Photo/Shutterstock.com

Deere & Company (NYSE:DE) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 54 hedge fund portfolios held Deere & Company (NYSE:DE) at the end of the second quarter which was 66 in the previous quarter.

We discussed Deere & Company (NYSE:DE) in another article and shared ClearBridge Investments’ views on the company. In addition, please check out our hedge fund investor letters Q2 2022 page for more investor letters from hedge funds and other leading investors.

Disclosure: None. This article is originally published at Insider Monkey.