Deere & Company: A Long-Term Owner's Perspective

Hunting ten-year five-baggers among great growth stocks — pressing the upside question: "Can it get much bigger?"

• QHow high is its market ceiling? Is it enlarging an existing pie, or creating an entirely new market?5/10

  A

  Conclusion first: Deere's ceiling is "making a mature, existing large pie deeper and smarter," rather than creating an entirely new market out of nothing. Its core battlefield — agricultural and construction machinery — is a mature, essential-demand industry that has existed for over a hundred years, with just a handful of global players. What Baillie Gifford truly loves — "a new species that creates an entirely new market and delivers ten-baggers in ten years" — is not Deere's story; it is the "strongest incumbent" within a mature oligopoly that lifts penetration, per-machine value, and service stickiness. This is the root reason it is of very high quality but has a naturally limited growth imagination.

  First, look at how mature the pie itself is. Deere itself defines FY2026 as "the bottom of the large-agriculture cycle" and expects U.S./Canada large-ag machinery industry volume to decline 15–20% year-on-year; meanwhile the USDA forecasts that in 2026 U.S. net farm income will be about $153.4 billion, a slight year-on-year decline of 0.7%. In other words, the "area" of this pie is determined by slow-moving variables such as farm profit, crop prices, interest rates, and farmland — it is even shrinking in the short term, not a track that expands rapidly on its own. The report characterizes the industry as "a cyclical industry within a mature industry" and "an excellent company in an average industry," and this judgment holds up.

  Where the ceiling is high: in "unit depth," not in area. The upper limit of Deere's growth imagination comes mainly from layering more precision agriculture, automation, and data services onto each unit of equipment already sold — upgrading hardware sales into "hardware + subscription" full-lifecycle monetization — rather than from selling more tractors. The company says its precision-ag technology annual revenue has exceeded $1.8 billion and is growing at 25%+, and the Operations Center connected acreage had exceeded 400 million acres by the end of 2025. This is a typical path of "thickening the existing pie" — raising ARPU, rather than opening up a new demographic.

  But one must be honest: this "thickening" path is still delivering very little today. The report repeatedly stresses a fact the company itself discloses — SaaS product revenue was still not a significant share in 2025. In other words, the "entirely new software-ized market" is for now more narrative and potential than a second pie that has already grown. So, answering strictly by Baillie Gifford's standard: Deere is enlarging and deepening an existing pie (the intelligent upgrade of mature farm machinery + construction machinery); it has not created an entirely new market that did not previously exist; its ceiling depends on the product of "existing-stock replacement + per-machine value increase," and the height of this product is constrained by an already-mature, strongly cyclical downstream demand pool. This is precisely the source of its "good company, but an unsexy growth ceiling."

  Jun 10, 2026
• QCan its revenue at least double over the next five years? Is growth driven mainly by volume, price, or new businesses?3/10

  A

  Conclusion first: Doubling revenue within five years (about 15% annualized) is almost unrealistic — this is Deere's hardest failing to fit into Baillie Gifford's LTGG paradigm. It is not only not growing right now but is in the contraction phase of a cyclical downturn: in FY2025, on a full-consolidated basis, net sales and revenue declined 12% year-on-year to $45.684 billion, and the company even defines 2026 as the bottom of the large-agriculture cycle. To double in five years from this starting point would require stacking three tailwinds — strong recovery, price increases, and new-business ramp — all at once over five years, which has a very low real probability.

  First, take the yardstick of historical growth. The report gives that over the nine years 2016→2025, "net sales and revenue" grew from $26.644 billion to $45.684 billion, a CAGR of only about 6.2%; and these nine years even spanned the 2023 boom peak of $61.251 billion. For a business with a long-term single-digit CAGR that is currently pulling back from a peak, the 15% annualized needed to double in five years is far beyond its historical capability.

  Now break down the three drivers, and see one by one why they cannot support a doubling:

  Volume: currently a headwind, rather than a tailwind. The company guides FY2026 U.S./Canada large-ag machinery industry volume to decline 15–20%; among the three equipment segments, only Small Ag & Turf and Construction & Forestry are given a net-sales outlook of "about +10%", while the precision-ag segment — the bulk of revenue (about $17.3 billion in FY2025, roughly 45% of equipment sales) — is instead guided to "decline 5–10%." At the volume level, the coming years are more about "bottoming and rebounding" than "doubling-style expansion."

  Price: the room to raise prices is thin. In FY2025 price realization was only about +1% for PPA, and even -2% for Construction & Forestry; the price realization given in the company's FY2026 segment outlook is also only on the order of +1.5%~+3%. Price increases can only contribute single-digit percentage points and cannot become a doubling engine.

  New businesses (digitalization/autonomy): right direction, but nowhere near enough in magnitude. Precision-ag technology annual revenue is over $1.8 billion, growing 25%+, which sounds fast, but its share of the total base of over $45 billion is still very small, and the company itself admits SaaS revenue is not a significant share. Even if it keeps growing rapidly, it will be hard to lift total revenue by an order of magnitude within five years.

  Honest conclusion: the more likely picture over the next five years is "a moderate recovery from the cycle bottom + a small positive price contribution + a gradual climb in digital revenue," corresponding to total revenue returning to and modestly exceeding the prior peak, at a mid-single-digit annualized rate, rather than doubling. The neutral-scenario owner earnings the report gives grows only 4% over ten years, which is a world apart from "doubling revenue." Buying Deere as a "five-year double growth stock" misplaces an excellent cyclical leader into a high-growth narrative.

  Jun 10, 2026
• QFive years from now, what will take over as the next growth engine? Does this "second curve" exist today?5/10

  A

  Conclusion first: the "second curve" most likely to take over five years from now is the software-ization and autonomy monetization of precision agriculture — it does already exist today, but it is still only a "seed," not an "engine," with neither the scale nor the certainty to sustain the kind of second growth pole Baillie Gifford wants. What truly takes over will be subscription and data services layered onto the same batch of equipment customers, rather than an entirely new business; this curve is directionally correct and its moat is real, but whether it can grow from "an insignificant share" into "the company's main profit source" is Deere's biggest suspense over the next five to ten years.

  The form of this second curve today is concrete and verifiable:

  • The data and subscription platform has taken shape. The John Deere Operations Center connects equipment owners, operators, and dealers into a network, with connected acreage exceeding 400 million acres by the end of 2025; precision-ag technology annual revenue has exceeded $1.8 billion, growing 25%+. The report also confirms that the company emphasizes the Operations Center, Connected Support, predictive maintenance, and operational-data capabilities strengthening aftermarket stickiness.
  • Autonomy and pay-per-use models are being deployed. Smart spraying such as See & Spray Gen 2 and self-driving tractors are moving from demonstration to commercialization, and the company is also piloting a "pay-as-you-go" subscription model for precision agriculture and says early demand is strong. This is a key lever for reshaping one-time hardware sales into recurring revenue.
  • Bolt-on acquisitions are being stepped up. The report notes that in 2026 Deere acquired Tenna, a mixed-fleet equipment and asset-tracking company, for $439 million — a small acquisition close to the core business that adds a brick to the data/fleet-management curve.

  But its "immaturity" must be honestly flagged: the report repeatedly cites the company's own disclosure — SaaS product revenue was not a significant share in 2025. In other words, this second curve exists today in products and early revenue, but does not yet exist on the main trunk of the income statement. In the valuation section the report explicitly lists "continued digital monetization" as one of the most fragile assumptions, and warns that "the market may be pricing in the future software-ized Deere, while what you buy today is still mainly the high-quality but heavily cyclical Deere."

  Wrapping up by Baillie Gifford's standard: a qualified "second curve" must satisfy three conditions — "visible today, can reach scale within five years, and can change the company's growth curve." Deere satisfies the first (visible), partly satisfies the second (ramping but still a small share), and the third (changing the curve) has not yet been proven. So the honest conclusion is: the "embryo" of the second curve genuinely exists and its direction is excellent, but treating it as a growth engine already in hand would overestimate the present and pre-spend the future — which is precisely one of the core reasons the report gives "Watch" rather than "Buy."

  Jun 10, 2026
• QWhat is its core competitive advantage? Will this moat widen or narrow over the next three to five years?6/10

  A

  Conclusion first: Deere's core moat is a five-in-one systemic advantage of "brand + independent dealer network + parts/service loop + captive financial arm + data ecosystem"; the judgment for the next three to five years is "overall stable, locally widening, locally squeezed by regulation" — neither a one-sided widening nor a failure. The report gives the moat 4.0/5, and I agree with this magnitude: it is real, deep, and hard to replicate, but one edge (aftermarket closure) is being actively thinned by regulation, so it cannot be given the top tier of "continuously widening."

  Why the moat is real and deep:

  • Systemic rather than single-point. The report makes clear that Deere's advantage "is a system jointly formed by whole machines, dealers, parts, repair, financing, data, and brand, rather than a single point of technology." To replicate it, a rival would need decades of brand, global channel, engineering capability, financial capability, and installed-base accumulation, rather than a few years of burning cash.
  • Service radius is competitiveness itself. The downtime window for large farm machinery is extremely short, and dealers' repair speed, spare-parts availability, and used-equipment residual value directly determine customer choice, so the brand is "the capital of operational trust," and dealers are a core component of the moat rather than an auxiliary channel.
  • The data ecosystem is reinforcing stickiness (the widening edge). Operations Center connected acreage exceeded 400 million acres by the end of 2025, and precision-ag technology annual revenue exceeded $1.8 billion, growing 25%+; the data-feedback loop deepens the more it is used. The report cautiously defines it as "a fairly strong ecosystem stickiness and data-feedback loop, rather than an absolute network effect that is hard to break once established" — this sense of proportion is right, and it does not hype it into an internet-style network effect.

  The squeezed edge (the narrowing edge) must be viewed calmly: the "degree of closure" of aftermarket/repair is itself a profit source, but for that very reason it invites regulation. The FTC, together with Illinois and Minnesota, sued Deere in January 2025, alleging that its repair restrictions raise farmers' costs, and it is still in the evidence-gathering stage; in April 2026 Deere again agreed to settle a "right to repair" class action with $99 million and a commitment to open digital repair tools to farmers and independent repair shops for up to ten years. The report's wording is precise — "this is not a total failure of the moat, but it shows that part of the moat has begun to be trimmed by regulation."

  Pricing power is the field thermometer of the moat, and the conclusion is also "partial": in FY2025 price realization was only about +1% for PPA and -2% for Construction & Forestry, from which the report judges that "pricing power on parts, services, and high-value technology packages is higher than on whole machines, and pricing power over whole machines is not absolute in a downcycle." This is self-consistent with "the moat is real but not impregnable."

  Net judgment for three to five years: the edge of data/connectivity/precision agriculture/full-lifecycle service is widening, the edge of aftermarket closure is being thinned by regulation, and whole-machine pricing power ebbs and flows with the cycle. On balance it is "stable, resilient, but not widening so much as to suppress everything" — giving 4.0/5 rather than a full mark is honest.

  Jun 10, 2026
• QIf its core business is disrupted, does it have the gene for self-reinvention? How does it treat mistakes and bad news?5/10

  A

  Conclusion first: Deere has a certain "self-reinvention gene," but it is a "gradual, industrial-type" reinvention capability, rather than the kind of drastic regenerative power Baillie Gifford favors — the ability to completely remake itself after being disrupted; the way it treats bad news is relatively rational, not covering up, and not cutting long-term investment for short-term profit. This company's resilience shows in "getting through the cycle profitably" and "sticking with R&D and transformation even at the trough," rather than "starting a new life after its core business is overturned." This is precisely a portrait of it being high-quality but not top-tier in growth regenerativity.

  First, look at the implicit premise of the "self-reinvention gene" — its essence is gradual rather than drastic. Over the past decade-plus, Deere has indeed actively remade itself from "an industrial company that sells iron" into "a smart-agriculture company with a data ecosystem": precision-ag technology annual revenue over $1.8 billion, growing 25%+, Operations Center connected acreage exceeding 400 million acres, and it keeps betting on self-driving tractors, See & Spray, and pay-as-you-go subscriptions. The report's characterization of this is restrained — it "is still more accurately defined as a high-quality industrial + service-ecosystem company, rather than one that has already become a high-margin software company." That is, it has the will and execution to transform, but this is an upgrade curve that continues the core business, rather than a regeneration where "a new species grows out of nowhere after the core is disrupted." If one day electrification/autonomy/new powertrains completely rewrite the industry, Deere can most likely keep up or even lead, but more likely as "a leader evolving together with the industry," rather than "a desperate turnaround."

  Now look at how it treats mistakes and bad news — this is actually a plus, with fairly hard evidence:

  • No R&D cuts at the trough. Against the backdrop of a weak large-agriculture cycle and FY2025 net profit having fallen from $10.166 billion in 2023 to $5.027 billion, the company still emphasizes through-the-cycle continued investment in new products and technology. The report judges from this that "Deere has not crudely halted R&D to protect profit," which is behavioral evidence of long-termism.
  • Not denying structural problems, and settling with real money. Facing the right-to-repair dispute, the company did not fight to the bitter end but settled the class action with $99 million + a ten-year commitment to open digital repair tools, and opened offline diagnostics and reprogramming functions to independent technicians on schedule; at the same time it still calmly faces the still-in-evidence-gathering FTC lawsuit. This shows that in the face of bad news it "prices in, absorbs, and adjusts," rather than "covers up and fights to the end."
  • Candid risk disclosure. The report notes that in its Q2 2026 disclosures the company proactively lists raw materials, supply-chain disruptions, and interest-rate and exchange-rate volatility as important uncertainties, without whitewashing the cycle and external risks.

  Honest wrap-up: by Baillie Gifford's standard, I can only give the "self-reinvention gene" a neutral-to-positive rating — it has the good genes of continuous evolution, not covering up mistakes, and still investing in the future at the trough, which lets it get through cycle after cycle with dignity; but it lacks the drastic re-creation power of "complete rebirth after being disrupted," because its fate is deeply tied to a mature, cyclical industry. Its attitude toward bad news (rational, transparent, willing to spend money to resolve it) is a genuine plus for its governance quality.

  Jun 10, 2026
• QDoes management (especially the founder) have a long-term vision, with interests deeply tied to the company? Are they willing to sacrifice current profit for five to ten years out?4/10

  A

  Conclusion first: Deere's management does have a long-term vision, its interest alignment is "present but not strong," and on the point of being willing to sacrifice current profit for five to ten years out the evidence is relatively positive; but it is not a founder-controlled company, and the CEO's net-worth tie to the company is far from the Buffett-style extreme alignment of "almost all net worth in the company." The report gives "management and capital allocation" 3.5/5, and I agree — rational, long-term-oriented, with decent risk awareness, but "buybacks at high prices" and "relatively mild ownership alignment" pull down the ceiling.

  First, look at the long-term vision and "sacrificing the present for the long term" — this evidence is fairly hard, a plus:

  • No R&D cuts at the trough, sticking with through-the-cycle investment. Against the backdrop of FY2025 net profit having fallen from $10.166 billion in 2023 to $5.027 billion and the company explicitly calling 2026 the bottom of the large-agriculture cycle, management still emphasizes continued investment in new products and technology. The report judges that "Deere has not crudely halted R&D to protect profit," which is genuine behavioral evidence of "willing to sacrifice short-term profit for long-term competitiveness."
  • Strategic acquisitions close to the core business, with strong risk-adjustment awareness. In 2025 it completed a 50% equity transaction of Banco John Deere with Brazil's Bradesco, explicitly to grow in Brazil while reducing incremental risk; in 2026 it acquired Tenna for $439 million to reinforce fleet management, a restrained size. From this the report considers management "long-term-oriented in operations, with fairly strong risk-adjustment awareness."

  Now look at interest alignment and consistency — this point must be honestly discounted:

  • Not founder-controlled; CEO ownership is "present but not extreme." The report discloses that CEO John C. May, after transactions in January 2026, still directly held about 117,970 shares and indirectly held about 27,891 shares through a trust; estimated at the roughly $500 share price at the time, the economic interest is not small, but the report bluntly states it is "far from the Buffett-style alignment of almost all net worth in the company." The "founder/helmsman sharing the company's fate" that Baillie Gifford values most is here only "present," not "extremely strong."
  • Governance and compensation endorsed by shareholders. The report notes that the 2025 proxy materials show the company engaged with shareholders holding over 40% of outstanding shares, and in 2024 shareholder support for executive compensation was about 92.4%, indicating no obvious signal of shareholder opposition at the governance level.

  The deduction must be named: the "timing discipline" of capital allocation is insufficient. The report notes that the company bought back heavily in 2023–2024, and in Q1 2026 again repurchased stock at average prices of $471.87 and $505.99; if the report's judgment that "the current price is already above conservative/neutral intrinsic value" holds, these buybacks at high prices do not meet the standard of "the best capital allocators buy back only when clearly undervalued." This is the key stroke that pulls management back from "excellent" to "above-average."

  Honest wrap-up: by Baillie Gifford's standard, management is a top student of "rational, long-term, willing to spend for the future, good risk awareness," but "founder-style deep alignment" is absent and "buybacks at high prices" expose a flaw in capital-allocation discipline. An overall above-average rating (3.5/5) is appropriate — trustworthy, but not the kind of extreme-alignment management you can "entrust with ten years, eyes closed."

  Jun 10, 2026
• QIf it disappeared tomorrow, how much would customers miss it? Is its way of growing sustainable, not reliant on harming society and regulation?6/10

  A

  Conclusion first: if Deere disappeared tomorrow, farmers and contractors worldwide would miss it very much — its indispensability is high; but its way of growing has a genuine flaw on the "social/regulatory sustainability" dimension, and the aftermarket-closure model has already stepped on the regulatory red line and paid a price. By Baillie Gifford's dual standard of "indispensability + social/regulatory sustainability," Deere scores high on the first, and on the second can only be counted as "partial pass, being forced to correct."

  First, look at indispensability — this dimension is very strong:

  • It is the first one farmers turn to when equipment goes down. The downtime window for large farm machinery is extremely short; Deere's dealer network carries sales, service, maintenance, spare parts, and technology deployment, and service radius and repair speed directly determine the harvest at the right time. The report notes that for farms and contractors, high uptime, used-equipment residual value, repair convenience, and downtime losses "often matter more than the purchase price itself," and the brand is "the capital of operational trust." Equipment without parts and service support is a paralyzed asset — this dependence is extremely high.
  • It is embedded in customers' operational data and production processes. Operations Center connected acreage has exceeded 400 million acres, accumulating data on equipment location, utilization, performance, maintenance, and agronomic execution. The report notes that the company stores large amounts of customer operating data and uses it to support customers and develop products — the more customers use it, the less they can do without this data loop.
  • It is systemically important to the food-production chain. The report cites USDA research noting that global food demand will rise significantly by 2050, and as the global farm-machinery leader, Deere's absence would directly hit farming efficiency. This is "genuinely indispensable," not "marketing rhetoric."

  Now look at social/regulatory sustainability — this dimension must honestly lose points:

  Part of Deere's indispensability comes precisely from its closed control over aftermarket repair, and this is precisely what regulators have deemed to harm farmers' interests. The FTC, together with Illinois and Minnesota, sued Deere in January 2025, alleging that its repair restrictions raise farmers' costs, still in the evidence-gathering stage; in April 2026 the company settled a class action with $99 million + a ten-year commitment to open digital repair tools to farmers and independent repair shops. The report's wording is precise — "this is not a total failure of the moat, but it shows that part of the moat has begun to be trimmed by regulation." In other words, part of its past profit came from "making it harder for customers to repair on their own," which is a genuine flaw in social sustainability.

  But to give a balanced view: the settlement itself is pulling the model back onto a more sustainable track. The company's commitment to open offline diagnostics and reprogramming functions means future growth will rely more on "genuine service value" than on "closed lock-in." At the same time, its core-business growth (improving farming efficiency, reducing inputs, precise application such as See & Spray reducing pesticide spraying) is positive in the direction of social benefit — this part of growth does not rely on harming society.

  Honest wrap-up: customers would miss it intensely (high indispensability, near a full mark); but its way of growing has in the past partly relied on aftermarket closure, a practice rejected by regulators, and is being forcibly corrected by litigation and settlement (social/regulatory sustainability counts as only a partial pass). This is precisely why the report lists "right-to-repair and antitrust risk" as one of its core bear reasons and lowers the moat ceiling accordingly.

  Jun 10, 2026
• QWhat are this business's unit economics (gross margin, incremental returns)? Does it get better or worse as scale grows? Where does the money it earns go?5/10

  A

  Conclusion first: Deere's unit economics are top-tier within "capital-intensive industry" — both profitability and cash conversion are markedly better than the common impression of traditional machinery; but it is essentially still "scale-driven, with large cyclical swings" industrial economics, rather than software's asset-light model of "the bigger the scale, the sweeter the margin," and the money it earns goes mainly to R&D, buybacks, and dividends. This is precisely the financial base color of it being "a good business but not a top-tier business."

  First, look at gross margin and profit margins — higher than the common notion of "an iron seller," but with obvious cyclical swings. The report roughly calculates on a consolidated basis: over 2023/2024/2025, gross margin was about 38.4%/40.5%/38.4%, operating margin about 21.3%/17.8%/13.7%, and net margin about 16.6%/13.7%/11.0%. Both of these hold: first, a gross margin of nearly 40% is indeed excellent for a capital-intensive manufacturer, showing that brand, mix, and service are lifting profitability; second, operating margin sliding from 21% all the way to 13.7% exposes the hard flaw of "unit economics swinging widely with the cycle" — FY2025 full-consolidated net profit declined 29% year-on-year to $5.027 billion, and in Q4 FY2025 the Small Ag & Turf segment's operating margin was even briefly pressed to 1.0% by tariffs, warranties, and costs. Scale failed to hold up marginal profit in the downturn, the opposite of the ideal unit economics of "the bigger the better."

  Now look at incremental returns and return on capital — stunning at the cycle peak, still decent after normalization. The report discloses the company's "return on beginning shareholders' equity" as 50.2%/32.6%/22.0% for 2023/2024/2025; even after the pullback, a 22% ROE is still excellent. But the report honestly cautions: this measure is heavily affected by financial-services assets and debt, "the equipment business's true ROIC" needs further splitting out, the available material is insufficient this time, and consolidated ROIC can only be roughly estimated in the "high-single to low-double digits." That is, incremental returns genuinely exist but the perception is "diluted" by the financial arm's balance sheet, and the high ROE partly comes from the cycle peak and cannot be linearly extrapolated.

  Does it get better or worse as scale grows? — "structural improvement + cyclical fluctuation" coexist. The report notes this is a business that "relies on the synergy of scale, brand, channel, service, and finance to lift the capital returns of traditional industry," and cash flow matched well over the three years through 2023 (reported FCF/net profit of about 0.69x/1.07x/1.22x over three years, averaging close to 1.0x), not piling profit on accruals — this is evidence of healthy unit economics. But it does not have software's "marginal cost approaching zero" attribute: every additional unit of equipment sold still bears manufacturing cost, R&D, and tariffs, and working capital (receivables, inventory) still disturbs cash flow quarter after quarter. The report's characterization of it as "a high-quality cyclical stock, rather than a steady-state business whose cash flow is smooth every quarter" is precise.

  Where does the money it earns go? Three destinations, documented in the report:

  • R&D (investing in the future): per the report, FY2025 R&D expense was about $2.311 billion, not cut at the trough, directed at precision agriculture and autonomy.
  • Buybacks (returning to shareholders, but with questionable timing): per the report, buybacks in 2023/2024/2025 were about $7.216 billion/$4.007 billion/$1.138 billion, and in Q1 2026 another $602 million was repurchased at average prices of $471.87–505.99; the report points out that buybacks at high prices are "not very restrained."
  • Dividends (steady returns): per the report, dividends grew from $2.40 per share in 2016 to $6.33 in 2025, about 11% annualized, and dividend payments in 2023/2024/2025 were about $1.427 billion/$1.605 billion/$1.720 billion.

  Honest wrap-up: the unit economics are "a top student within heavy industry" — high gross margin, matched cash flow, genuine incremental returns; but it swings widely with the cycle, lacks software-style increasing-scale dividends, and capital flows mainly back to R&D and shareholders. It deserves a quality premium, but it does not deserve the label of "a growth stock whose unit economics get sweeter the bigger it grows."

  Jun 10, 2026
• QFor it to rise fivefold in ten years, what conditions must hold simultaneously? Are these conditions realistic? What expectations does today's share price imply?2/10

  A

  Conclusion first: for Deere to rise fivefold in ten years (about 17% annualized) would require a stack of strong assumptions that can almost never hold simultaneously in reality; and today's share price of about $560 implies precisely the opposite — it has already pre-spent "high quality + continued flawless digital delivery," leaving very thin room for upside. Note that the question asks about "fivefold in ten years," but for a mature cyclical leader like Deere, even this threshold is extremely demanding; this is precisely the quantitative base for the report giving "Watch" and judging it "expensive and excellent" rather than "cheap and excellent."

  First, nail down the current price. At the time of writing, the report anchored DE at about $529.24 per share, market cap about $143.36 billion, and static P/E about 28.96x; whereas as of the June 10, 2026 close, DE was about $560 per share, market cap about $151.2 billion, trailing P/E about 32.7x — that is, the share price has risen about 6% above the report's baseline, valuation is even more expensive, and the margin of safety can only be thinner, not thicker. The subsequent judgments here are handled on the basis of "the current price is higher, and the report's conclusion is unchanged in direction and further reinforced."

  What conditions must hold simultaneously for a fivefold gain in ten years (each annotated for realism):

  1. The valuation multiple does not compress, and even stays high — very unrealistic. The current trailing P/E is about 32.7x, whereas the past 3-year average is about 18x and the 5-year average about 18x. To get fivefold, one would have to count on the market granting near-30x on a "half-industrial, half-tech" basis over the long run, but once it reverts to the normal range of a high-quality industrial stock (the teens to twenties), multiple compression alone would eat a large chunk of the return.
  2. The profit center multiplies several times over — historical capability does not support it. The report's 2016→2025 net-profit CAGR is about 14.2%, but these nine years spanned the 2023 boom peak of $10.166 billion, and FY2025 has already fallen back to $5.027 billion, down 29% year-on-year. To take profit fivefold within ten years from a cycle bottom would require sustained high growth far beyond the historical record.
  3. Digitalization/SaaS grows from "an insignificant share" into the main profit — not yet proven. The report repeatedly cites the company's disclosure: SaaS revenue was still not a significant share in 2025. This second curve is directionally right but nowhere near enough in magnitude.
  4. The large-agriculture cycle recovers strongly and no longer pulls back — contrary to official expectations. The USDA forecasts U.S. net farm income of about $153.4 billion in 2026, down 0.7% year-on-year, and the company itself calls 2026 the bottom of the large-agriculture cycle, with U.S./Canada large-ag machinery volume declining 15–20%.
  5. Regulation does not further weaken the aftermarket profit pool — there is reverse risk. The FTC lawsuit is still gathering evidence, and the company has already paid for right-to-repair with a $99 million settlement + a ten-year opening commitment.

  These five conditions must hold "simultaneously" for a fivefold gain, which has an extremely low real probability. The report does not even give any scenario approaching fivefold: even in its optimistic scenario, the annualized return over the next ten years is only 4%~7%, neutral 0%~3%, conservative -3%~-1%.

  What expectations does today's price imply? — it implies "continued perfection," not "cheap." The report's three owner-earnings discounts give per-share intrinsic value of about $212 conservative, $313 neutral, and $454 optimistic, with the optimistic upper edge at about $520 after widening the range; the current ~$560 is already "at or even beyond the upper edge of the optimistic value range." The report is incisive: "buying at today's price is buying continued flawless execution, rather than buying a margin of safety." Meanwhile its earnings yield of about 3.5% is already below the roughly 4.57% U.S. 10-year Treasury yield of May 21 that the report cites — it cannot even beat the risk-free return, let alone deliver fivefold.

  Honest wrap-up: a fivefold gain in ten years for Deere is not just "difficult"; it "requires five strong assumptions to be delivered miraculously and simultaneously," which is unrealistic; today's share price not only leaves no discount for such upside but has already pre-spent the optimistic scenario entirely. Buying it as a "fivefold-in-ten-years candidate" is paying up for perfection — which is precisely the report's core conclusion of "Watch, wait for a better entry point."

  Jun 10, 2026
• QWhy hasn't the market realized all this yet? Is it that it doesn't understand, looks down on it, or can't see far enough? What will become the "narrative inflection point"?2/10

  A

  Conclusion first: for Deere, Baillie Gifford's classic question "why hasn't the market realized it yet" needs to be asked in reverse — the market has over-realized its virtues and pre-spent the good into the price, rather than failing to realize them. It is neither misunderstood nor looked down upon; rather, it is "seen too far, too fully." This is exactly the opposite of Baillie Gifford's typical scenario of hunting for "an undervalued great growth stock": Deere is a name that is "fully or even over-recognized," and the mismatch risk comes from the optimistic narrative running ahead of the facts, rather than from a slow market.

  Checking against "doesn't understand / looks down on / can't see far," the conclusion is none of the three:

  • Doesn't understand? No. The report characterizes this business as "understandable" — selling equipment, selling parts, selling services, providing financing, with a clear core business. The only "dirty" part is that financial services and operating leases make the cash-flow accounting complex, but this does not constitute "the market failing to understand its worth," and institutional coverage is ample.
  • Looks down on? On the contrary, the market has granted a thick quality premium. The current trailing P/E is about 32.7x, whereas the 3-year and 5-year averages are both only about 18x; the report's peer comparison also shows Deere clearly enjoying a premium (Caterpillar P/E about 16.58x, CNH about 18.95x, AGCO about 13.25x), with P/B about 5.2x far above AGCO's about 1.7x and CNH's about 2.2x. This is "being looked up to," not "being looked down on."
  • Can't see far? On the contrary, the market sees "too far." The report pinpoints the most critical cognitive dislocation: "the market may be pricing in the future software-ized Deere, while what you buy today is still mainly the high-quality but heavily cyclical Deere." The market has counted in the long-term dividends of digitalization, autonomy, and data services ahead of time, while the company itself discloses that SaaS revenue was still not a significant share in 2025 — this is "seeing too far, treating potential as already delivered," not "unable to see far."

  So where does the real perception gap lie? — the direction is "negative" (the market leans optimistic), not "positive" (the market leans pessimistic). The report's earnings-yield calculation of about 3.5% is already below the roughly 4.57% U.S. 10-year Treasury yield the report cites, meaning the market is willing to accept an initial return below the risk-free rate for this single cyclical stock — which only holds under the optimistic expectation of "believing it will keep growing above trend." Once this expectation is falsified by reality, the re-pricing direction is downward.

  What will become the "narrative inflection point"? (an implicit premise; observable signals given per the report's clues):

  • Downward inflection (more likely to arrive first): ① after large-agriculture demand recovers, margins are still markedly below expectations, proving the "bottoming and rebounding" narrative has fallen through; ② digitalization/data/autonomy revenue keeps failing to reach scale, puncturing the "software-ization premium"; ③ the aftermarket and repair ecosystem is further restructured by the still-in-evidence-gathering FTC lawsuit or subsequent regulation, weakening the aftermarket profit pool; ④ market sentiment turns, compressing the valuation from near 30x back to the teens-to-twenties range common for high-quality industrial stocks. The report warns that if multiple compression coincides with a cyclical downturn, a 30%–50% share-price decline over the next few years is not unimaginable.
  • Upward inflection (requires hard evidence, currently absent): precision-ag subscriptions (annual revenue over $1.8 billion, growing 25%+, Operations Center over 400 million acres) truly ramp to the point of changing the profit structure, and the large-agriculture cycle confirms a strong recovery — only when both of these are verified by data does the optimistic narrative count as "delivered" rather than "pre-spent."

  Honest wrap-up: Deere's peculiarity is that it is a high-quality leader whose greatness "the market has already fully, even excessively, priced in," rather than a hidden growth stock whose greatness "the market has not yet realized." The real inflection is more likely a downward one of "the optimistic narrative being corrected by reality," rather than an upward one of "value being discovered." This is precisely why the report repeatedly stresses that "a good business does not automatically equal a good investment" and gives "Watch, wait for the cycle and valuation to together offer a better entry point."

  Jun 10, 2026