This Ag Play Offers Attractive Risk / Reward: Pro
Shares of Deere & Company landed on the trader radar after Piper Jaffray upgraded the stock to ‘Overweight’ from ‘Neutral’ and gave the stock a $93 price target.
“We believe near-term fundamentals and the 2013 outlook are likely to prove much more resilient than investors fear,” wrote analysts in a client note.
Trader Guy Adami, managing director of stockMONSTER.com, agrees and adds that around $77 a long position in Deere offers an attractive risk/reward trade. According to his proprietary analysis, “The risk is $73 on the downside for potential $90 on the upside.”
There is a caveat; Adami also says a bullish bet on Deere would have to coincide with a bullish outlook on the broader market.
In other words, Deere will move in the same direction as the broader S&P.
If you’re looking for other ways to play the space, trader Stephanie Link, director of research at TheStreet, suggests DuPont. “I’m not so sure farmers will need more equipment next year but I do think they’ll buy seeds and crop protection.”
Trader Jon Najarian, co-founder OptionMonster.com, adds that Agco is an attractive play.
However, not all the traders are bullish. Trader Steve Grasso, director of institutional sales trading at Stuart Frankel, thinks in the ag space, most gains have already been made.
“I’ve been talking to farmers,” he says, “and yes Wall Street guys talk to farmers. They’re telling me you don’t fertilize a dust bowl. That says to me the run in ferts is over.”
Posted by CNBC's Lee Brodie
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Trader disclosure: On July 30, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Stephanie Link is long AAPL; Stephanie Link is long JPM; Stephanie Link is long WFC; Stephanie Link is long MCD; Jon Najarian is long AAPL CALL SPREADS; Jon Najarian is long CSCO CALL SPREADS; Jon Najarian is long WMT CALL SPREADS; Jon Najarian is long V CALL SPREADS; Jon Najarian is long F CALL SPREADS; Jon Najarian is long NXY CALL SPREADS; Jon Najarian is long SHAW CALL SPREADS; Jon Najarian is long BBY CALL SPREADS; Jon Najarian is long HLF CALL SPREADS; Jon Najarian is long GLUU; Jon Najarian is long CIGX; Jon Najarian is long CBOE; Jon Najarian is long CME
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