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Why Did Deere Stock Rise 13% Last Month?

Motley Fool - Mon Apr 8, 8:29AM CDT

Shares of Deere & Company(NYSE: DE) rose 12.5% in March, according to data provided by S&P Global Market Intelligence. Bullish data from the agricultural sector helped to soothe investor concerns about demand for the company's products. Meanwhile, favorable capital market conditions stimulated demand for dividend stocks, which created momentum for Deere stock.

Good news on the demand front

Deere reported earnings in February that beat Wall Street's estimates, but the stock tumbled thanks to a disappointing full-year outlook. High crop prices throughout last year led to many farmers being flush with cash, creating a "tractor boom." Investors have been anticipating an end to that boom for multiple quarters, and it seems that high interest rates combined with normalizing inflation are putting a damper on Deere's forecasts.

A farmer in a baseball hat sitting on a tractor and looking at a pasture as the sun sets in the distance.

Image source: Getty Images.

However, March was a good month for the agriculture industry. The Fidelity Agricultural Productivity Fund gained nearly 8% in March. Deere makes up about 25% of the mutual fund's holdings, so some of that strong performance was driven by Deere itself.

Still, the rest of the portfolio implicitly delivered impressive 5% returns during the month. The Teucrium Soybean Fund and the Teucrium Wheat Fund, which are commodity-tracking exchange-traded funds (ETFs), both performed well during the period, suggesting improved financial conditions for one of Deere's key end markets.


FARMX data by YCharts.

Purdue University also published a farmer sentiment index, which indicated an improved outlook among agricultural producers in March. In general, it was a positive month for many of Deere's customers, helping to reverse some of the damage created by its lukewarm full-year outlook from February.

Capital markets were excited about stocks like Deere in March

Deere stock showed a high correlation with industry competitor Caterpillar last month, a strong indicator that gains were driven by wider trends in the industrial sector and capital markets.

DE Total Return Level Chart

DE Total Return Level data by YCharts.

Deere also benefited as March was a strong month for dividend and value stocks relative to growth stocks. The Vanguard Value ETF and the Vanguard High Dividend Yield ETF each climbed nearly 5% during the month, while the Vanguard Growth ETF only gained 1.2%.

VUG Chart

VUG data by YCharts.

The "Magnificent Seven" stocks and tech stocks in general dominated headlines throughout much of 2023, but it looks like investors are making a clear shift toward value right now. Reliable, dividend-paying bellwethers like Deere, which currently yields about 1.4%, are often popular during these sorts of shifts.

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Ryan Downie has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Index Funds-Vanguard Growth ETF, Vanguard Index Funds-Vanguard Value ETF, and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool recommends Deere & Company. The Motley Fool has a disclosure policy.

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