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The Only Stock Worth Buying in 2013

Adem is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

December in a nutshell: the world didn’t end, but in the mind of average investor, you’d never know it. Indeed, it appears that Wall Street has gone Mayan but not me—I’m full of hope.

Have I gone mad? Become a cheerleader? Or perhaps I’m just oblivious to all of the gloom and doom over the fiscal cliff, debt ceiling and all the other “treats” our dysfunctional Government has to offer.

I can assure you, I am not. There’s a stock with such bullish long term prospects that any market panic in 2013 will be a gift.  

That’s why I’m only buying one stock in 2013

We’ll get to the one stock I’m buying in 2013 in a moment but first, a few honorable mentions. If I was buying more than one stock in 2013 I’d consider one of the following, which have great prospects.

Coach (NYSE: COH) is one of the top aspirational luxury brands in the world. It’s coming off record earnings and growth in earnings per share, and, even better, Coach has a return on assets of 34.67%. Despite the growth and awesome performance, the stock has been held largely in check due to investor concerns over its European exposure. The concern is understandable, but with Coach’s ridiculously high return metrics growing, it’s a safe bet that customers are continuing to pay up for luxury, despite the economy. Even better, if you’re worried about inflation due to QE3 you’ll want to invest in companies with pricing power; with a huge ROA due to an enormous “brand moat,” Coach is that kind of stock.

Rails have been beaten down because of concerns over coal carloads, which are down significantly. However, with coal exports still expected to rise dramatically in the long term (thanks to China and India) the sell-off may be overblown. If coal is really going to doom the rails does it make sense that CSX (NYSE: CSX) would have record earnings this year, growing nearly 9% yoy from a previous record in 2011? The rails operate as an oligopoly, with few competitors, which has helped CSX earn an ROE of 22% for shareholders. With rail now 3 times more fuel efficient than highway travel, it’s hard to see anything but success as it chugs along.

And as I’ve said time and time again, I’m one of the few bulls on the employment services sector. Sometimes it’s dangerous to try and “outsmart” the market but this is an area the market seriously misunderstands. Temp business thrives in periods of high unemployment; Kelly Services (NASDAQ: KELYA) is performing amazingly for that reason, but it’s also transforming itself into a full service employment provider so it may thrive in all environments. Mr. Market just can’t get this one right as Kelly has beaten expectations for 12 straight quarters.

But I can’t buy any of these stocks right now because the stock I want is behind a can’t miss trend that comes down to these simple numbers:

7. 9. 15. 11. 44. 1837.

Deere (NYSE: DE) is the one stock I’m planning on buying in 2013. Why this isn’t an obvious buy to everyone is beyond me, the stock has been kept in check at a P/E of just 11 because it’s recently missed analyst estimates by a slim margin. But the case for Deere doesn’t lie in the next quarter or two; it lies in the long-term, can’t-miss opportunity that lies ahead.

The world has 7 billion people to feed, and that number is rapidly growing to 9 billion. Factor in record droughts and climate change fears and it’s clear, the world is getting harder to feed. Deere helps solve this problem.

Sure, they missed quarterly expectations, but they still had record earnings and EPS growth of 15%, and agriculture has been the largest contributor to our national GDP.

Is this trend going away? Hard to imagine, so why does Deere trade at just 9 times forward earnings?

Deere is well positioned to take advantage of this growing agriculture bull. Its current return on equity of 44% shows how well positioned it is globally as it has pricing power. Deere has been in business since 1837, pays a solid dividend of 2.2% and when demand pops customers will want to go with a trusted familiar name; as they say, “nothing runs like a Deere.”

Sure, I may buy other stocks

But I can tell you this; it won’t be until Deere is well over $100. As an investor, your job is to play “Dr.”; find the pain that will ail the world and find what makes it better—who better than Deere? My belief in the underlying agriculture bull means I’ll be unlikely to sell Deere into any panic that 2013 may bring. It’s the perfect stock for these troubling times.


Adem Tahiri owns shares of CSX, Kelly Services, and Deere & Company. He has no plans to change any of his positions within the next 72 hours. The Motley Fool owns shares of Coach. Motley Fool newsletter services recommend Coach. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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