One of the best plays for long term investors in the midst of a bear market is to buy the large machinery companies on the dips. That is because these stocks will bounce back the most when the economy gets back on track.

However, there is one sub-group of large machinery companies that holds up better than most during these tough times. And that is the agricultural machinery companies because the demand for food remains fairly stable during recessions.

That is why now is a great time for long term investors to consider the 3 best players in the agricultural equipment group: Deere & Co (DE), Caterpillar (CAT), and AGCO Corporation (AGCO)

Let’s harvest the rest of the details on these 3 prime picks below.

Deere & Co (DE)

John Deere (DE) is one of the nation’s most recognizable brands and even has a color named after it. If you live in or travel at all through agricultural areas you are likely familiar with “Deere Green”. This company is one of the mainstays of the agricultural industry, throughout our country and beyond. Agriculture is one industry that is receiving a lot of positive attention these days, and with the continued stay at home orders and focus on essential industries and workers, we don’t see that changing anytime soon.

According to Seth Weber over at RBC Capital, there’s still a nice bit of upside potential with DE.Analysts are looking for around 33% share price gain on average with consensus on a target price of $173. Considering the current list price of $129.87, it may be true that nothing runs like a Deere…stock that is.

AGCO Corporation (AGCO)

This company acquired the popular Canadian ag company, Massey Ferguson, a manufacturer that benefits from strong brand loyalty. AGCO, as the name suggests, is a major player in the manufacture and sale of farming equipment. Due to the recent focus on food production, and the elevation of the agriculture industry to “essential” status, it’s likely that farmers will be reaping the rewards, both due to increased demand as well as continued government assistance. That certainly is a tailwind for AGCO.

Note that earnings growth before the recession was consistently impressive.  That is why analysts are not shy recommending AGCO with an average price target of $68.85 on shares at this time.

Caterpillar (CAT)

CAT is best known as a construction company, supplying heavy machinery to builders and mining companies. However, don’t overlook the fact that CAT also has sizable exposure to the agricultural machinery industry.

Caterpillar (CAT) is the poster child for big machinery. That often means it falls first when things go rough (down to $87.50 recent low). But it also means it rises first when the outlook improves. So long term investors will have a hard time staying away from CAT shares when economy looks ready to get back on track.

Also helping the CAT investment story is an uber-attractive 3.6% dividend yield. When the bank and government bonds are paying virtually 0%, then sticking CAT in the back of your portfolio for a couple years seems quite reasonable when it keeps writing you such big dividend checks.

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DE shares closed at $138.46 on Friday, up $8.51 (+6.55%). Year-to-date, DE has declined -19.63%, versus a -10.42% rise in the benchmark S&P 500 index during the same period.

About the Author: Steve Reitmeister

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks. More...

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