DE - Deere is top short-sale idea from Hedgeye's industrials analyst

2023-03-21 16:56:17 ET

Deere ( NYSE: DE ) was named as the best stock to sell short in a March 19 report from an analyst at research firm Hedgeye.

“We are moving Deere ( DE ) up to our Top Short, with ample data pointing to excessive optimism in this deep cyclical,” Jay Van Sciver, industrial-stock analyst at Hedgeye, said in a report. “For machinery more broadly, higher rates, tightening credit and falling capacity utilization spell the end of the pandemic-era order boom.”

Hedgeye said stocks of machinery companies tend to lag the Federal Reserve’s changes to interest rates, “outperforming during tightening and underperforming during cuts. With recent bank failures and the likely stiffening of credit standards that follow, we think the performance inflection is here.”

The Fed on Wednesday will announce its next decision on rates. The central bank is juggling its efforts to reduce inflation by raising the cost to borrow while also avoiding further damage to the banking system following this month's failures of Silicon Valley Bank and Signature Bank ( SBNY ).

Deere’s ( DE ) stock in the past year has declined 4.7%, compared with a 10% loss for the Standard & Poor’s 500 stock index ( SP500 ). The stock has rallied more than 40% since hitting a 52-week low last summer.

A short sale typically happens when an investor sells a stock borrowed from a brokerage with the expectation of buying it back at a lower price for a profit.

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