In this article we presented the list of 10 best agriculture technology stocks to buy now. Click to skip ahead and see the 5 Best AgTech Stocks To Buy Now.
If you haven’t been sleeping under a rock since the beginning of the pandemic, you might have noticed that investors have been flocking into the next generation technology companies in increasing numbers. This resembles the 1998-2000 dotcom market. We believe a large number of stocks are in bubble territory as investors try to predict the winners of the emerging tech-fueled industries.
In recent weeks we talked about the energy revolution and shared our lists of the best solar energy stocks, best lithium and battery stocks and best hydrogen fuel cells stocks to buy. We also talked about software revolution and shared our lists of best cybersecurity stocks and best cloud computing stocks to buy.
We also talked about the technological changes in the healthcare sector and highlighted the best biotech stocks to buy and best genomic stocks to buy. We are on the cusp of big technological breakthroughs in artificial intelligence and robotics. Cheaper and cleaner energy combined with developments in gene editing and robotics will also have profound effects on agriculture and agriculture technology stocks aren’t in most investors’ radars.
We recently reached out to Sang-hoon Shin, the CEO of data agricultural startup Green Labs, to talk about the developments and opportunities in the agriculture technology space. Green Labs has recently raised $18 million in Series B funding, with blockchain VC firm Hashed leading the round. A staple of the Korean smart farm market, Green Labs has now raised a total of $28 million. With a sizable war chest at its disposal, Green Labs intends to commence a recruitment drive and refine its one-stop digital service that connects farmers’ production to distribution. The agri-tech firm also has plans in place to enhance the technology of its smart farm network, launch agricultural exchanges, and facilitate online purchases of agricultural materials.
Green Labs CEO, Sang-hoon Shin
Technological innovation is at the heart of Green Labs’ business model: the company launched Korea’s first cloud-based complex environment control system back in 2018, a system that automatically controls all IOT devices in the farm remotely. Since then, the Green Tech Corporation’s solutions have helped farmers throughout the country produce more and healthier crops at lower cost, and sell in better market conditions. One such product is a data-based management system called Farm Morning, which enables farmers to manage production without having to be on-site.
Through the IoT-equipped Farm Morning application, farm owners can ramp up production and explore various distribution channels to sell more yield. While the app’s AI-based Growth Environment Optimization Engine informs users which environment is best for growing specific crops, it also assesses historic production and sales data to estimate which channels are most profitable.
Green Labs plans to utilize blockchain technology in this promising next phase, and in doing so provide more value for its expanding customer base. "We will lead in innovation to maximize the value of data generated at agricultural sites through this funding,” explained CEO Sang-hoon Shin. “By recording key data generated by Green Labs' value chain in blockchain, all participants will be able to build a transparent and reliable agricultural data economy platform."
According to Shin 1.6% of South Korea’s GDP comes from agriculture, forestry and fishery, although traditional farming methods still dominate and agri-tech is expected to furnish opportunities to strengthen agricultural competitiveness in the years ahead. The smart farming market is currently estimated to be worth around 5.4 trillion won ($4.9 billion USD), and will continue to rise as farmers face demands to produce more food for a growing global population, while guarding against problems related to adverse weather conditions and climate change.
Simon Seojoon Kim, CEO of Hashed, said, "The agricultural market was inefficient compared to its huge size and importance due to the information asymmetry and lack of trust of participants. We expect Green Labs, a leader in the data agriculture industry, to introduce blockchain to build an agricultural data protocol that innovates beyond production and distribution."
A report published by Polaris Market Research earlier this month suggests that the smart agriculture market will more than quadruple within the next five years, exceeding $20.6 billion by 2026. Room for further growth is virtually limitless, however: the global agriculture industry is valued at $5 trillion.
According to Green Labs’ Shin agri-tech systems to date have largely been devoted to reducing waste, improving growing conditions and increasing production, though the next phrase will likely include commercially available drones and robots tasked with distributing seeds, preventing soil pollution via precision crop spraying, and minimizing time-intensive manual labor. Blockchain technologies represent a promising means of recording data used by such machines, and in doing so enhancing the global food supply chain.
As you can see agriculture technology space is a promising area to invest in, yet there aren’t a lot of pure play publicly traded stocks to invest in. In order to identify the best agriculture technology stocks to buy now, we created a short list of 39 US traded companies from the latest holdings of Defiance Next Gen Food & Agriculture ETF (DIET) and sorted them using Insider Monkey’s proprietary hedge fund sentiment scores for each stock. By the way Defiance liquidated this ETF, so investors' only option is to create their own portfolio of agtech stocks.
Our in-house analysis shows that we can use the sentiment information gathered from the hedge fund filings to classify in advance a select group of stocks that can beat the S&P 500 index by double digits annually on average. For instance, the portfolio of our monthly newsletter’s stock picks has beaten the market by over 88 percentage points since March 2017 (see details here). Some of the portfolio holdings of our monthly newsletter have been shared publicly too. In October, we shared this real estate stock and since then, it’s been up nearly 50 percent.
Based on our hedge fund sentiment data here are the 10 best agriculture technology stocks to buy now:
10. Conagra (CAG)
No of HFs: 35 Dollar Value of Hedge Fund Holdings: $770 million
Conagra Brands Inc.(CAG), is a packaged food company that produces different varieties of products. The company makes and sells products under separate brands that can be availed in a food service establishment. We recently published an article about Conagra based on an interview with CAG's CEO Sean Connolly. Here is an excerpt from that article:
“We’ve been transforming our portfolio for 5 years now. It has been a massive innovation overall”. He stated, the thing they’re experiencing with the pandemic is that consumers are now discovering that the frozen food they consume today is outstanding. “It’s essentially fresh food that is frozen but it’s on call and ready when they are and it’s a great value. Excellent food, excellent value and they’re buying it again and again,”.
He said that they are seeing similar dynamics in the food industry today with the 2008 market crash. The CEO noted that the last time they’ve seen this significant microenvironment eating occasion was last 2008. “When we saw the pandemic hit, we saw a larger shift at home eating occasions and we see no reason why some of that won’t sustain because basically, the way to think about it is, we believe we are experiencing an acceleration of product trial that in normal time, would take years and hundreds of millions of dollars.”. Accordingly, they have a portfolio that has been pleasing their consumers to come back and buy again.
“In our company, we’re often focused on how do we generate more demand, and in the past 9 months, our focus is how do we generate more supply. In some cases, it haven’t made sense to invest in marketing because we are simply out of capacity and our supply was constrained because the demand was so elevated”. Sean Connolly also mentioned that they’ve built back some of their capacity. He said that their inventory levels are strong, and their marketing investments have been opportunistic. “Our frozen business is growing strongly overall– because there’s a lifetime value to the consumers that we capture today and even the repeat rates were putting up.”.
“Moms and Dads everywhere are seeing their sons and daughters learn how to bake and their cooking up in the kitchen with a product like Duncan Hines. That is the example of the kind of product that you see growth in when consumers go into more of a ‘nesting’ mode”. Sean Connolly said that people are looking for simple meals to eat and that their products are meeting that need right now."
9. Tyson Foods (TSN)
No of HFs: 36 Dollar Value of Hedge Fund Holdings: $618 million
TSN ranks 9th in our list of the best agriculture technology stocks to buy now. Arkansas-based Tyson is the second largest processor of meat, chicken and pork. In December 2020, Tyson Foods shares reached a nine-month high after Piper Sandler analyst Michael Lavery upgraded the stock to Overweight from Neutral with a $77 price target, upped from $70. The analyst said that the market has not priced in the upcoming recovery in the food services sector following the coronavirus vaccines. Tyson has a solid exposure to the food services and restaurant sector.
Cliff Asness’ AQR Capital Management is one of the top shareholders of Tyson, with 1.93 million shares of the company, worth $115.1 million. The fund is one of the 36 elite funds tracked by Insider Monkey that reported owning shares in Tyson entering the fourth quarter. Here is what we said about TSN last month:
“The stock of one of the largest processors of chicken, beef and pork in the world, is down by more than 22% since the beginning of the year as the company has been hit hard by the pandemic with several facilities closed over outbreaks. However, Tyson posted better than expected EPS and revenue for the last quarter and provided a strong full year-guidance, saying that it expects strong performance of its Beef and Pork segments and growth in Chicken and Prepared foods segments. Recently, Piper Sandler upgraded Tyson Foods, Inc. (NYSE:TSN) to Overvweight from Neutral and raised the price target to $77 from $70. The analyst suggested that a reopening of the economy as a vaccine is released will boost food service sales, although eat-at-home trends will also remain strong.”
8. Corteva Inc (CTVA)
No of HFs: 36 Dollar Value of Hedge Fund Holdings: $1.1 billion Corteva ranks 8th in our list of the best agriculture technology stocks to buy now. GDS Investments talked about Corteva Inc. (NYSE:CTVA) stock in their Q2 2019 investor letter. Here is what they said:
“When Corteva was spun off on June 1, 2019, DuPont shareholders received one share of Corteva for every three shares of DuPont which they owned.
Corteva, meanwhile, produces specialized agriculture chemicals which have FDA approval (similar to prescription drugs) and maintains a duopoly position in the domestic seed market (Bayer AG ADR (OTC: BAYRY) and Corteva control roughly 60% of the domestic market). The company begins its new life with $14.3B in global sales, $2.8B in EBITDA, and expected growth of 6%-10%. The mechanics of Corteva’s spin-off left the company with cash on the balance sheet which should exceed $2B by the end of 2019 and make the company attractive in an agricultural industry which has seen a lot of merger activity over the past several years. We see every reason to continue to hold Corteva and, if possible, take advantage of that activity in the future.”
7. McCormick & Company (MKC)
No of HFs: 37 Dollar Value of Hedge Fund Holdings: $316 million
MKC ranks 7th in our list of the best agriculture technology stocks to buy now. McCormick is in the spice business. Even though its shares declined more than 30% in March, the stock quickly regained its value as consumer were forced to cook at home and use more of MKC's spices. MKC recently purchased FONA International for $710 million. According to the company's website "FONA creates and produces flavors for many of the largest food, beverage, and nutritional companies in the world. A unique proposition in the flavor industry, FONA prides itself on a high-tech, high-touch vision — helping customers grow through both cutting-edge technology and personal customer service."
6. FMC Corporation (FMC)
No of HFs: 41 Dollar Value of Hedge Fund Holdings: $526 million
FMC Corporation ranks 6th in our list of the best agtech stocks to buy. FMC Corp (NYSE:FMC) is a chemicals company with a focus on agriculture. FMC shares returned around 20% in 2020 as FMC Corp managed to beat the earnings estimates for at least the past four quarters, although it missed revenue expectations for the last two. FMC also recently updated its 2020 Q4 outlook. FMC expects to generate around $500 million in free cash flow in 2020. The company also guided for 7% organic revenue growth for 2020 and 5-7% revenue growth for 2021.
"Despite the global pandemic and these near-term operational challenges, we delivered a solid 2020 and remain highly confident in our 2021 outlook and our ability to deliver FMC's long-range growth plan targets," said Mark Douglas, FMC president and CEO.
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Disclosure: No positions. 10 Best Agriculture Technology Stocks To Buy Now is originally published at Insider Monkey.