The Tractor Story
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Arris Group (ARRS)
The following tractor story originally appeared in Cabot Wealth Advisory July 12, 2010. Readers liked it. I’m running it again because writing time has been scarce in recent days (I’ve been at a professional conference), and because, well, I’ve been looking for an excuse to run it again! Rest assured that the stock recommendation at the end is as fresh as always.
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When my father published the very first issue of his market letter in 1970, he borrowed the name Cabot from the farm where we lived. His father had bought the farm in 1941 (the full story is on our website) and in 1948 he bought a brand new tractor to replace the horses used on the farm.
The tractor was a Ford Model 8N, perhaps the most popular tractor ever sold. Approximately 524,000 were produced from 1947 through 1952.
The price was about $1,400.
Here’s a picture of me and my brother Rob sitting on it. I’m the kid with the curly hair.
Designed for the small-time farmer, the Ford Model 8N had four cylinders, displacing 120 cubic inches. It generated 27 horsepower and—more importantly for farmers—92 foot-pounds of torque at 1,500 rpm.
At Cabot Farm, we used the tractor for grading the dirt road, for hauling things and people in the wagon and above all for mowing the fields … not to get a hay crop but just to keep the property clear. If you don’t mow a field, you eventually end up with a forest.
Here’s a picture of me and Rob and our father on the tractor in 1996.
This photo was taken by a professional photographer hired by Summit Technology, which used it in their corporate annual report. In brief, we had discovered the stock of the company, which was a pioneer in the laser eye surgery industry, in 1989. The three of us had our eyes lasered … successfully. And subscribers who followed our investment advice did very well, selling for a profit of 443% in 1996. Much later, Summit was acquired by eye-care giant Alcon.
But back to the tractor.
In 1996, when the picture was taken for Summit, the tractor was still being used for those chores. Sometimes it sat idle for weeks. Sometimes, in mowing season, it was used hard several days in succession. A few years ago, it was given a major overhaul, and in the current mowing season it’s been working as hard as ever. Like any 62-year-old vehicle, it requires pampering. The brakes are almost useless. It overheats on hot days. And it would rather go downhill than up. But when it breaks down, mechanically talented family members fix it up. And in the end, it gets the job done.
Now here’s the funny thing. Even though we live on Cabot Farm, we Luttses are not really farmers, and we don’t know any real farmers. As a result, none of us has ever driven a tractor newer than our 1948 Ford! In a way, to us, they don’t exist. When it comes to farming equipment, we’re stuck in a time warp.
We replace our cars like average people, but we keep on using the same old 1948 Ford tractor.
Partly it’s tradition. Partly it’s parsimony. And partly it’s lack of exposure to the modern-day alternatives.
Now, I know the 1948 Ford won’t last forever, but I also know that when it is replaced, we’ll have lost one of the traditions that binds us to the farm, to our past, and to each other.
So here’s a question for my readers who are also farmers.
Should we keep on using the old 8N, which serves as a reminder of where we’ve come from? Or should we look at the modern-day alternatives, perhaps lightly used?
If I get enough answers, I’ll reprint them next week.
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Well, I got answers, alright, and I printed the best a week later.
“Keep the old tractor, it has character like your firm does. Any moron can go out and buy new; what you have is a bit of family history.”
A.S.
“Timothy, I would give you my blessings to trade that 8N, provided that you take out a sizeable loan on the new alternative; just so the Three Musketeers know how it feels to be a genuine farmer in the USA.
On the other hand, if you have that itch that can’t be scratched without a newer model tractor, you just better park that poor Ford in the barn ... so that you can use it for those important “city farmer” chores, when the dream tractor breaks down. Happy Mowing”
N.M. Idaho
“Easy answer to your question. Do a ground floor restoration, screw by screw. If not, do a partial restoration and just use for special occasions & hayrides. Remember Oliver Douglas?”
S.N. Massachusetts
“I live in Wisconsin and there are still lots of Ford 8N tractors being used. They were made to last, not like the throwaway equipment made today. The older we get, the more we know older is not bad.”
W.S. Wisconsin and happy to be here.
“Re: 8N Ford. It will have problems with the carburetor float that is hard to fix, even by those who know what is wrong. I finally had to change to a diesel, used, to do my chores, somewhat heavier duty than your farm will require. You will be slightly sticker shocked by the price of new tractors. I prefer Deere tractors now, but Ford, Kubota are also good.”
F.S. Farmer from NJ to Colorado.
“I’m not a farmer, but most of my relatives in Ohio are. We have a 1,000-acre farm that grows corn and soybeans, and has a creek, fishing ponds and a sugar woods where one of the grandsons still makes awesome Ohio maple syrup. (I’ll bet you never guessed there was maple syrup in Ohio!) I think what my relatives might say is use the old tractor if it gets the job done. Why get rid of such a valuable and inspiring part of your family history if it’s still working? You may want to try and replace the brakes, just for safety’s sake. I remember my Uncle Joe taking all us kids for rides around the farm on his old tractor. They just don’t make them like that any more. Here’s to keeping memories alive”.
E.J.K.
“Come on, you know the answer. As long as you can keep it running and it does what you need it to, it’s much better than investing in even a used newer model. Besides you know you’re emotionally attached to it!”
S.L.
“When I was about 14 we had an 8N that my father bought new. After I became skilled on it and its related equipment I was allowed to do work for our neighbors for $10.00 per hour. I got to keep half, which was a lot of money in 1950. My best friend farms 6,000 acres. They have mowers with closed cabs, air conditioners, stereo and GPS. They have balers that make 1,800 lb bales. They also have an old Ford 8N and I drove it last year just for fun. Everything still worked just as I remembered it. If you want a more modern tractor, buy it, but keep the Ford for your kids to restore.”
J.T. California
“I’d suggest having the old Ford 8N restored. It would be a great way to continue the tradition of your farm and enhance its utility at the same time. It would be a shame to upgrade to something newer. After all, it has served you well for the past 60-plus years. And the story of its restoration would make another great newsletter!”
J.R.
“We, too, had that same tractor. Simple, reliable, and easy to work on: any tractor mechanic worth his salt has worked on ‘em. If you’re not expanding your workload to vastly more acreage or hauling new, heavier, PTO-driven machinery that’d over-tax the old boy, why change?”
D.S.
“I learned to drive on an 8N and graduated to a ’46 International truck in the late 1950’s. Many good memories of the farm life in my early teens. I hope you will keep it and let your grandchildren have that experience. If you need something else for the work, get what you need, but keep the 8N.”
M.M.
“Never sell it; it has a heart, soul and the Lutts footprint. If it can no longer do the work that you need it to do, then buy another but keep your old 8N, cozy and loved in a rickety wooden shed. It will always bring to you, family and grandchildren such warm family memories.”
P.H. Sardinia
“Considering the sentiment and value of family traditions, I say, by all means keep the old tractor. Even if it’s only to remind you of good times during bygone days, it still has value that has no price tag. If it’s no longer able to keep up with the farm’s modern demands, bronze it and put it on a pedestal somewhere.”
J.G.
“I’m 91, knew your father before he started Cabot, and have a son, 65, who lives in Maine and hays for a hobby (500 bales a day last week). My advice, keep the tractor, have fun maintaining it, and pass these memories on to your children and grandchildren. They are more important then gold.”
T.F.G. Massachusetts
“This reminds me of a favorite tractor of mine, a John Deere with a flywheel hand starter that I played with when I was just a young lad. I think you should keep the old Ford tractor indefinitely. It is a poignant reminder that when it comes to basic tasks you don’t need to be shiny and new to get it done. It also speaks to the human journey and how we can function at a high level even as we age with a little help along the way!”
John
“I think you should keep the 8N if it is still capable of serving your needs. (But I’m prejudiced.) My grandfather bought a new 8N about the time I was born. The Ford was what I learned to drive on at a very young age. No matter what grandpa did, the Ford would not back up any of the wagons like his team of horses would, so I was drafted to do the backing up. I was probably about eight when I started driving. As with your Ford, ours did yeoman service for many years. Plowing, cultivating, harrowing, haying, and pulling any type of wagon, stoneboat, slip scraper, fresno, and whatever else we could think of to hook onto. Anyone who had the three point hitch harrows will remember what happens when the pin for the top link is not put in, or falls out as the lynch pin was not installed. Pulling on an immoveable object with the drawbar too high would result in the front wheels leaving the ground heading for points unknown. The Ford also taught us to not drive with the thumb wrapped around the steering wheel. It usually took only a few violent altercations with the steering wheel spokes to smarten up.
“I still get nostalgic when I see one of the old Fords. Even though I have had other tractors with more features, power, and creature comforts. The Ford 8N was always a valuable asset to our farm enterprise.”
B.D. British Columbia
“I live in the Seattle area and have a 103-acre farm/ranch in north central Idaho. I’m not a farmer but have been looking at tractors for a year now since I have the same mowing issues you have. When I go there my three weekends a month I mow, water, fix and repair. I like it but it is a lot of work and at times I’m happy getting in my Dodge Turbo Diesel truck and heading west back home on Sundays. I’d buy a nicely used Kubota in the 50 hp range with a roll over protection system (ROPS) so all you Luttses stay safe on the tractor. Set up the Ford for some specific project and use it sparingly.”
J.O. Redmond, WA
“I wish I had your toy and sounds like that’s what it is. I always say I cut my teeth on its twin and ours was used on a producing farm. We mowed and racked hay, which we sold or fed our livestock. We used it in wheat harvest to pull a trap wagon. Ours had a hoist with a bucket and it shoveled all the cow stuff out of the barn. Sure beat a manure fork and a wheelbarrow. Many times it was my saddle horse to herd the livestock.
“Sounds like you need to get a pro mechanic and reline the brakes and rebuild the radiator, forget the backyard mechanics and do it right. What you are doing is halfway repair similar to one of your investors using E-Trade to save a buck. Step up to the pay window and you will be able to use it another 50 years. OLD is GOOD.”
G.A.
“Looking at those two youngsters on the tractor, it’s obvious. It needs to be kept for them and their youngsters. I’m 59 and have a hobby “farm” also, the old Ford is here for the grandchildren, but I got practical and bought a moderate size skidsteer with tracks, very best tool I’ve ever owned. It works for everything from snow removal to portable scaffold.”
D.W. Minnesota
“I’d stay with the 8N! Call me old fashioned but I bought a used 1950 model in 1972 and it kept my 10 acres in sunny Southern California neat and trim until a divorce cost me both the property and the tractor some 10 years later. It was very reliable and rather easy to repair and I often wonder where it is now! I’m sure if I still had that land, I would still have that tractor.”
A.J.
“I like your new format and it is shorter, more to the point. As “Fiddler On The Roof” tells us, “Tradition” is important. Your tractor has served you well and it will in the future. My beliefs are, “If you take care of equipment, it will take care of you”, and your love for that gal will never be recovered if it is gone.”
R.N.
“You can’t beat those old 8N’s, they take a beatin’ and keep on creepin’. Just a little care now and then and you should get another 60 years out of it! Sure you could get a newer one with more power and whatnot, but if she keeps doing the job---keep her.”
B.A. Colorado
“Don’t get rid of the tractor. Your kids and grandchildren will get sick of hearing you say, “I wish I had kept that tractor”.
G.L. Tennessee
“Great story. I’m not a farmer, but keep the tractor!”
R.D. South Korea
“I am an old guy, 66. I am very traditional, but I like the new stuff, iPods, cell phones, computers etc. I still have an original Atari game. It even works. In this day of video games and more exciting things, the grandkids like to come over and play Pac-man on the old game. It would be nice to have a new tractor, but don’t get rid of the old one.”
T.O.
“Keep on using the old 8N! It is your link to your past on the farm and the memories of where you have been. It was a great article, and a fascinating tradition – it should be maintained and continued as long as possible. There are not enough stories like this one in this day and age.”
S.L. Alberta
“I enjoyed reading about your tractor. My first was a 1952 8N that I bought used with a loader, two-bottom plow, spring tine harrow, and mower for $1,100 in the mid ‘70s. My farming relatives had 8N’s, 9N’s and 2N’s when I was a kid and a couple of them are still in use. I would probably still have mine if it hadn’t burned. Something to warn you about. I had been brush hogging on a hot day and ran out of gas. I filled it and went back to work. I was watching where the cutter was going behind me, guiding it between trees maintaining one of my trails through my woodlot. When I turned around, flames were leaping up between my knees. The gas had been stored in my garage, which was cool. It expanded faster than it was being consumed and was spurting out of the breather hole in the cap and ignited by the hot exhaust manifold. I was unable to put the fire out by throwing dirt on it. By the time I got back with a fire extinguisher, the glass settling bowl had broken and the fire was being fed by a 1/4-inch stream from the full ten-gallon tank.
“I guess I am what you would call a gentleman farmer, mostly retired from a career as a materials scientist and part time outdoor writer with several pieces of property in upstate NY. I manage my woodlots, trails, fields, wildlife food plots, etc. I enjoy hunting and gathering firewood and have some income from the land, including a wind farm lease option, antenna space rental and an upcoming timber harvest.
“My current tractor, which is my fourth and the first that I bought new, is a 2006 New Holland TC34D. If I had time I could fill a book with tractor stories. My advice to you is to buy a new tractor, a medium to larger size compact diesel 4X4 with a front-end loader. But don’t get rid of your old 8N. There are any number of times that having a second tractor will be very useful and it sounds like the old tractor is part of your life and who you are.
“You might even want to consider New Holland’s new version of the 8N that they brought out about a year ago. It seems like a capable machine even if it is a little gimmicky play on the legacy of the original. I wish I had the time to write more now. I always enjoy talking tractors but I’m too honest to be a salesman.”
T.L. New York
“We had a Massey 35 very similar to your 8N Ford. My grandfather used it for many years until the early 80s and finally replaced it with a Ford 3910. The old tractors did the job and worked well. However, the newer tractors will amaze you. They are also typically diesel powered, so are superior to gas powered engines in torque. Not to mention they are very durable. All of this said, do not get rid of the old 8N. Restore it and keep it as a collectable tractor and display it in a prominent place on the farm as a reminder of the 62 years of service it has given you but more importantly the memories of your grandfather, father and brother and the times you have had on the farm and how close this has brought all of you. This will be, in my opinion, the best of all worlds because you can hold on to the past and the memories without much cost and be more efficient with your limited time on the farm. In my family, we are constantly dividing our time between the farm, children and work. They are all important to us and we want to be as efficient as we can be with our limited time resources.
“I would advise you to look at three makes of tractors; Kubota, New Holland or John Deere. All of these make very good compact diesel tractors that are ideal for your application. In the current market deals are being made on new tractors.”
R.Y. Kentucky
“I own both a 9N (1941 model) and 49 hp Massey Ferguson 4 wheel drive tractor (2009 model), and I like owning both. I sold my Dad’s 8N after his death 4 years ago, and last year bought a 9N after the auctioneer said it didn’t have the hydraulic problems of the 8N. Only later did I learn that Ford brought out the 9N in 1939, the 2N in 1942 and the 8N in 1948 so I had really bought an older tractor!
“The N’s were and are very dependable. Of course the N also brings backs many memories of a simpler time and friendlier machines. And I would encourage anyone that likes a little nostalgia to buy an N with one large caveat . . . the N’s have inherent safety problems. Rear-end heavy, it’s easy to lay them over backward and weights should be added to the front. More dangerous is the live PTO. Unless a functional PTO slip clutch is added, it is possible for something like a brush-hog to push the novice operator through a fence.”
J.B. Oklahoma
“I am not a farmer either, but I know a touching and compassionate story when I hear one. I would like to offer the following comments and advice:
“The Tractor” is not just a tractor. “The Tractor” is a symbol of your wonderful upbringing, fond memories, rich family traditions, family values, and all that is good with your family heritage. The tractor also represents: corporate America all the way back to the Industrial Revolution, wonderful American engineering and great American Labor, American Culture, and American History. “The Tractor” has given your family so many years of wonderful use, fond memories, loyalty, and longevity. “The Tractor” transcends the materialistic world. It has truly become a family heirloom, and as such should be immortalized (honored), in a special way. With that said, here is my humble advice: Restore “The Tractor” to its original condition using family labor as well as honoring an employee from the Ford Motor Company that originally built the Ford Model 8N tractor back in 1947. Then display the tractor in a unique spot on the “Cabot Farm” along with a special plaque which includes the pictures that were included in your Cabot Advisory report you sent to us as well as a picture of your entire family along with a paragraph or two honoring your mother and father and what they stood (stand) for. Create a look as though you were preparing and presenting the exhibit for a museum to display.
“I appreciated the opportunity to respond to your wonderful and thoughtful story. When we look back on our lives, it is always the fond memories we created with others that makes life worth living. Thank you for sharing a special family story with all of your readers.
“With appreciation and friendship.”
W.O. Nevada
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Clearly, much as we are all bound by an interest in investing, there’s a lot of commonality in farm work and yard work as well, and a lot of wisdom and passion about the subject.
Today, the tractor is little changed from four years ago. It’s still working, we’ve just begun the second mowing of 2014, and as I mow my section, I will think of the readers who share similar experiences all across the country.
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Moving on to the market, the leading indexes remain strong, and growth investors still have plenty of stocks to chase higher. For momentum investors—like those following GoPro (GPRO), which I highlighted at the Cabot Investors Conference back on August 15, these days can be fun.
But—stock valuations are high, and I’m still concerned that the market is building along-term top.
So for many investors, particularly those with longer time horizons, caution is the watchword. To me, that means looking for value.
And when I look for value, the first place I turn is Cabot Benjamin Graham Value Investor.
Value guru Roy Ward highlighted Arris Group (ARRS) in the latest Special Features issue. Arris is not a household name, yet most of us are customers of the company, indirectly.
That’s because almost everything you watch, whether it’s on a television, tablet or smartphone, goes through Arris’ equipment.
Since buying Google’s Motorola Home business in April 2013 for $2.35 billion, Arris is the king of the industry, the leading supplier of digital video and IP television hardware and software
And it’s selling a lot of gear to companies like Comcast, Verizon, Time Warner and AT&T, as the industry evolves to more and more IP (Internet Protocol) technology.
In the third quarter, sales are expected to grow 30% and earnings 68%. Yet the stock’s current PE is just 13, quite low.
In part that’s because the stock sold off after a disappointing second-quarter earnings report back on August 1.
You can see how the stock bottomed at 29 then, and in the month since has built a base at that level, as far-sighted investors accumulate stock. Last week it nearly touched 29 again, but on much less volume, and that chart, combined with Roy’s value analysis, tells me the upside is attractive from here.
Lastly, Roy’s Minimum Sell Price for ARRS, which is calculated using a huge number of inputs, is 43. He expects it to get there within a year.
So, you could just buy ARRS here, but even better would be to become one of Roy’s loyal readers.
Yours in pursuit of wisdom and wealth,
Timothy Lutts
Chief Analyst, Cabot Stock of the Month
Publisher, Cabot Wealth Advisory
