your agriculture company investment analysis 2014

Your Agriculture Company (NYSE:AGCO) Investment Idea Analysis 2014

Your Agriculture Company (NYSE:AGCO) is an investment idea that I looked at a couple of months ago. You can read the in-depth AGCO investment analysis here.  In fact…

Most of the thesis in the above AGCO analysis is still in place. On paper, things look pretty good. And in case you’re too busy to read the above, the basic gist is as follows:

AGCO manufactures and sells farm equipment, like tractors, combines and grain storage facilities. While sales have leveled out a little earlier in 2014, operations are going well. If you think people will keep eating food, AGCO seems like a good way to profit from it.

And one more thing…

AGCO’s operations generate a cash flow yield of over 10%,  and they’re using a ton of it to buy back shares. It’s hard to imagine

But could this tractor company be temporarily under water?

Well, let’s take a look at some recent price action in AGCO to set the stage…

AGCO Weekly Stock Chart Analysis:

AGCO weekly chart july 2014

AGCO is in a strong weekly uptrend. But in the last few quarters some big selling has shown up. (Click to Enlarge)

As you can see in the chart above, over the last few years trading in AGCO has generally held to an upwards trend. It’s now hugging the trend, and the valuation looks pretty good. On the other hand…

If a long term down trend is just starting, then it’s probably a bad time to initiate a trade or investment. So let’s zoom in:

AGCO Daily Stock Chart Analysis:

AGCO daily chart july 2014

On the daily time frame, AGCO has seen a lot of selling. (Click to enlarge).

As you can see, there’s a ton of selling hitting the stock. The red bars are, on average, bigger than the green bars. Surely that can’t be good. And it’s not.

But there’s a glimmer of hope. Because all in all, AGCO has held up relatively well despite the selling. And this could be a good sign. So currently…

AGCO sits at a bit of a crossroads. If it fails to find support, the sellers could finally crack their nut. And that could lead to a tough harvest for stock holders this fall. But when you look at the fundamentals, the company is a little under-valued, generating huge cash and has a very strong business. So what’s an individual investor to do?

At this point, I believe in the long term success of the company. They have a strong balance sheet, make a ton of money and have strong global exposure.  And management is using all that extra cash to buy up a bunch of outstanding shares. I’m happy if there’s an interim dip in price, (which ironically will improve the efficacy of the share buybacks.)

And (disclosure) because I already own a little AGCO, I’m not in a rush to buy more just yet (especially since there’s no dividend). I plan to add to my position if AGCO forms a short-term double bottom at $50.50. Or I’ll start buying if the stock begins to put in a couple of higher lows.

Here’s the bottom-line:

Success in active investing can really be helped by a basic awareness of technical analysis. A little position management can go a long way. And it’s not hard to do a bit of “if/then” contingency plan.

Stocks oscillate in price. Rather than ignore this you can do a little legwork to make it work in your advantage. It’s not rocket science. So…

Although I’m eager to buy AGCO for the long term, I’m happy to wait for an intelligent entry. I’ll wait for an uptrend to resume (seen by 2-3 higher lows) or on the bounce up from a bounce to $50.40. That’s intelligent swing trading.

And By the Way: If you’re still looking for more information, download my eBook – “The Intelligent Swing Trader” –  on the side of this page. You’ll also get email updates for new trade ideas that show you how to determine if stock market opportunities are for you.

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