In this article, we discuss the 10 best agriculture stocks to invest in. To skip the detailed analysis of the agriculture sector, go see 5 Best Agriculture Stocks To Invest In.
According to a study, 43 million or 30% of all the jobs in the United States are directly or indirectly related to the food and agriculture sector. The annual wages from the sector sum up to $2.3 trillion. Moreover, the sector contributed $718.2 billion in taxes in the prior year and the total economic output of the industry is around $7.4 trillion.
The global agriculture industry was worth $11.287 trillion in 2021, which is expected to grow to $18.814 trillion in 2026 at a CAGR of 10.7%, including horticulture and aquaculture. In 2021, Asia Pacific held the biggest share in the agriculture market, followed by North America.
Surging Prices Due to Inflation and War
Inflation in the United States reached a 40-year high when the CPI rose to 9.1% in June according to the labor department data. In July, the CPI dropped more than expected to 8.5%, yet the inflation didn’t slow down for food prices as they surged by 10.9%, reaching a 42-year high.
The initial increase in food prices came from droughts and the issues created on the supply chain front and labor shortages due to the COVID-19 pandemic. The more drastic effect came from the Russian invasion of Ukraine. Russia, the largest wheat producer in the world and the third largest supplier of grains in the world, had to face sanctions from the West. Furthermore, Ukraine is one of the largest wheat producers, and the supply constraints led to an increase in demand and a decline in supply. These two countries account for nearly a third of global wheat and barley, two-thirds of global sunflower oil supply and Ukraine is the 4th largest corn exporter in the world. Moreover, the bird flu in Europe and North America also had a slight impact on egg and poultry prices.
However, due to the supply constraints and rising food prices, some agriculture companies managed to pass on their expenses to the consumer and became highly profitable in 2022. On top of that, some of these companies were able to capture significant market share that was previously held by Russia and Ukraine. CF Industries Holdings, Inc. (NYSE:CF), Deere & Company (NYSE:DE), and The Mosaic Company (NYSE:MOS) are some of the most notable agriculture stocks to invest in.
Our Methodology
After careful assessment of the agriculture industry, these stocks were picked according to their fundamentals, financial reports, dividend history, analyst ratings, growth catalysts, and other metrics.
The stocks have been listed according to their hedge fund sentiment in Q1 2022. The hedge fund sentiment was taken from Insider Monkey’s database of 900+ elite hedge funds.
Best Agriculture Stocks To Invest In
10. ICL Group Ltd (NYSE:ICL)
Number of Hedge Fund Holders (Q1): 14
ICL Group Ltd (NYSE:ICL) is an Israeli fertilizer, metals, and chemical products company that mostly caters to its customers in Asia. It is the sixth largest producer of potash and approximately 33% of the world’s bromine is produced by ICL Group Ltd (NYSE:ICL).
The main growth driver of ICL Group Ltd (NYSE:ICL) was the Russian invasion of Ukraine. After the Russian fertilizer export ban and sanctions against Belarus’ potash, the company’s gross margin increased from 32.8% to 49.3% in Q1 2022. On top of that, the operating margin and adjusted EBITDA margin increased from 12.3% and 20% to 35.7% and 39.7%, respectively. In the second quarter of 2022, consolidated sales grew by 78% YoY to $2.88 billion, and operating income was up by 369% to $1.139 billion. Moreover, the adjusted net income of $751 million represented a 456% YoY growth and the adjusted EBITDA was $1.258 billion, compared to $360 million in the prior year.
As of August 10, ICL Group Ltd (NYSE:ICL) has a dividend yield of 9.89%, which is significantly higher than its peers. The company is set to pay its next quarterly dividend of $0.229 on September 14 to the shareholders of record on August 30. ICL Group Ltd (NYSE:ICL)’s P/E ratio is 7.58 as of August 10, which is significantly below the S&P 500 Index’s 22.56 average.
CF Industries Holdings, Inc. (NYSE:CF), Deere & Company (NYSE:DE), The Mosaic Company (NYSE:MOS), and ICL Group Ltd (NYSE:ICL) are some of the best agriculture stocks to invest in.
9. FMC Corporation (NYSE:FMC)
Number of Hedge Fund Holders (Q1): 26
FMC Corporation (NYSE:FMC) is an agriculture science and chemicals company. The company primarily focuses on crop protection, plant health, and professional pest and turf management products. On August 2, FMC Corporation (NYSE:FMC) posted an EPS of $1.93, beating the $1.87 consensus and outperforming the revenue estimates by $120 million. The revenue of $1.45 billion also represented a 16.9% growth. Compared to the same quarter in 2021, the EBITDA of the company was up by 3% at $360 million. Due to the high demand for herbicides and insecticides, sales surged by 26% in North America on a YoY basis. On the other hand, the sales grew by 42% in Latin America. The company exited the quarter with $591.5 million in cash and cash equivalents.
In addition, for FY2022, FMC Corporation (NYSE:FMC) guided its revenue outlook to the range of $5.5-$5.7 billion from $5.25-$5.55 billion. The company decreased the high point of its adjusted EBITDA to $1.44 while the midpoint remained the same at $1.40. The company also revised its EPS guidance to the range of $7.00-$7.70 from the previously expected $6.70-$8.00. The free cash flow for the year is now expected to be in the range of $565-$685 million.
The most significant growth catalyst for FMC Corporation (NYSE:FMC) is the cross-selling of the company products to DuPont de Nemours, Inc. (NYSE:DD)’s customers. In 2017, FMC Corporation (NYSE:FMC) entered into an agreement with the latter to divest a portion of DuPont de Nemours, Inc. (NYSE:DD)’s crop protection business for cash and FMC’s Health & Nutrition business. In Argentina alone, FMC Corporation (NYSE:FMC) gained 78% of unique customers from the Dupont acquisition. On top of that, the company announced the acquisition of Denmark-based pheromone research and production company BioPhero for $200 million. The company expects a contribution of $1 billion in revenues at above company-average EBITDA margin by 2030 from the acquisition.
Here is what Miller Value Partners had to say about FMC Corporation (NYSE:FMC) in its Q2 2022 investor letter:
“We also believe that a lot of Energy equities remain mispriced. The sector generated negative returns in four of the last six years (2015, 2017, 2018, and 2020). Even with a strong 2021 and start to 2022, the Energy sector 10-year returns at the end of the 2nd quarter are only 4.3% versus 18.7% for Technology and 13% for the overall S&P 500. Our two energy holdings – Nabors Industries (NYSE:NBR) and TechnipFMC (NYSE:FMC) – are oil service companies that recently experienced multi-year trough conditions. Given the delayed industry Capital Expenditure (“capex”) recovery, both companies have only recently seen higher utilization rates, improved pricing, higher margins, and growing backlogs. It is also important to note that their revenue isn’t directly tied to a commodity price but to industry capital spending trends. Both management teams see a multi-year positive industry capex cycle with oil prices greater than $70/share. Nabors and TechnipFMC share prices are still 75% below their 5-year highs, at low single-digit cash flow multiples, and normalized free cash flow yields in excess of 30%. Both companies have significant price-to-value gaps that offer the potential to generate very positive long-term returns.”
8. CNH Industrial N.V. (NYSE:CNHI)
Number of Hedge Fund Holders (Q1): 33
CNH Industrial N.V. (NYSE:CNHI) is an agriculture machinery and heavy equipment company. The company operates in 180 countries across the globe. According to the Insider Monkey database, 33 hedge funds had a stake in the company, with a combined value of $1.2 billion at the end of Q1 2022.
For Q2 2022, CNH Industrial N.V. (NYSE:CNHI) reported an EPS of $0.43, exceeding the forecasts by $0.06, and $6.08 billion in revenue against the $5.27 billion consensus. The operating margin was 14% of the company’s net sales at $663 million. At the end of the quarter, CNH Industrial N.V. (NYSE:CNHI) had cash and cash equivalents of $2.855 billion and the debt totalled $20.817 billion. The FCF from industrial activities was recorded at $404 million, and the company ended the quarter with $8.795 billion in liquidity. The company also received $350 million for the sale of the Raven Engineered Films Division. Furthermore, the company approved a repurchase program of $300 million to be initiated as soon as the existing $100 million buyback program is completed.
On August 1, Deutsche Bank analyst Nicole DeBlase reiterated a Buy rating on CNH Industrial N.V. (NYSE:CNHI) and raised his price target to $17 from $16. The analyst told the investors that the company reported a “solid” quarter and the upward guidance revision leaves room for an upside.
Here is what Longleaf Partners Fund had to say about CNH Industrial N.V. (NYSE:CNHI) in its Q4 2021 investor letter:
“CNH Industrial (55%, 2.51%; 16%, 0.65%), a leading farm equipment and commercial vehicle manufacturer globally, was another top performer for the year. CNH reported strong results throughout the year, beating our initial conservative expectations. The US agricultural cycle has been firmly in the company’s favor, driven by commodity price strength, healthy farm balance sheets, advanced technology adoption, and aging fleets feeding replacement demand. We believe we are past the mid-cycle but expect the strong upcycle to continue with the solid orderbooks and strong visibility. On December 31, 2021, CNHI completed the demerger of its on-highway business, which includes its IVECO commercial vehicles and FPT powertrain businesses. This transaction creates a pure play off-highway company comprised of the higher-multiple agricultural, construction and specialty vehicle businesses. We expect a narrowing of the discount to the net asset value once we have two focused companies valued at peer multiples.”
7. Corteva, Inc. (NYSE:CTVA)
Number of Hedge Fund Holders (Q1): 39
Corteva, Inc. (NYSE:CTVA) is an American agro-chemical and seed company. The company has recently announced a quarterly dividend increase to $0.15 from the previous $0.14, payable by September 15. On August 4, Corteva, Inc. (NYSE:CTVA) announced its Q2 2022 results. The company posted an EPS of $1.64, outperforming the estimates by $0.18. On the other hand, the $6.25 billion revenue represented a 13.6% YoY growth and exceeded the estimates by $160 million. Corteva, Inc. (NYSE:CTVA) raised its FY2022 EPS guidance from the previous range of $2.35-$2.55 to $2.45-$2.60 and expects the revenue to be from $17.2 billion to $17.5 billion, compared to the $16.96 billion consensus. The previous revenue guidance was from $16.7 billion to $17 billion.
On August 8, J.P. Morgan analyst Jeffrey Zekauskas upgraded Corteva, Inc. (NYSE:CTVA) from Neutral to Overweight and raised the price target to $63 from $58. The analyst noted that the corn and soy prices will allow the company to raise its seed prices for 2023. He added that Corteva, Inc. (NYSE:CTVA) “should report good EBITDA and earnings growth in 2023 in the context of a weakening global economy, and so we think the company is positioned to outperform the general market.”
Here is what Aristotle Capital Management had to say about Corteva, Inc. (NYSE:CTVA) in its Q1 2022 investor letter:
“Corteva Agriscience, one of the world’s largest seed and crop protection companies, was a primary contributor for the quarter. Due to its respected brand and the value-added benefits of its patented seeds and crop protection solutions for farmers, Corteva has been able to more than offset input cost inflation with sustainable price increases. In addition, the company’s ongoing mix shift to higher-margin, premium products, a catalyst we previously identified, is aiding both sales and profit growth. Shares were likely also buoyed by the rise in crop prices. Market participants, perhaps eager to chase short-term trends, poured into the sector. At Aristotle Capital, we look past such gyrations and, as long-term investors, do not attempt to predict short-term changes in commodity prices. We remain excited about what we view to be high-quality characteristics and fundamental improvements that permeate Corteva’s business, not the least of which include its pricing power.”
6. Archer-Daniels-Midland Company (NYSE:ADM)
Number of Hedge Fund Holders (Q1): 42
Archer-Daniels-Midland Company (NYSE:ADM) is an American agricultural goods and food processing company. The company operates 270 plants and 420 crop procurement facilities globally.
Archer-Daniels-Midland Company (NYSE:ADM) posted a Q2 EPS of $2.15, compared to the $1.72 consensus. The company’s revenue of $27.28 billion outperformed the estimates by $2.41 billion and recorded a 19% YoY growth. The company’s Ag Services & Oilseeds segment grew 17.3% YoY and the Nutrition segment rose by 15.6%. Carbohydrate Solutions represented the most significant year-over-year growth of 33% at the end of the quarter.
Archer-Daniels-Midland Company (NYSE:ADM) had cash and cash equivalents of $906 million and used $675 million in cash for operating activities. Additionally, the company reported long-term debts of $9.166 billion and shareholder equity of $24.426 billion.
On July 27, Baird analyst Ben Kallo reaffirmed an Outperform rating on Archer-Daniels-Midland Company (NYSE:ADM) and bumped up the price target to $94 from $87. Kallo wrote that the fundamental demand has increased in the long term, owing to multiple factors such as the demand for renewable diesel and for feeding the Asian swine population. The analyst further noted that the company is earmarking capital to return to shareholders and has plans to invest in organic opportunities.
Archer-Daniels-Midland Company (NYSE:ADM), CF Industries Holdings, Inc. (NYSE:CF), Deere & Company (NYSE:DE), and The Mosaic Company (NYSE:MOS) are some of the notable names in our list of agriculture stocks to invest in.
Here is what Diamond Hill Capital had to say about Archer-Daniels-Midland Company (NYSE:ADM) in its Q1 2022 investor letter:
“ADM is a leading agricultural processor that also operates a global nutrition business focused on the development of ingredients and flavors for food and beverages, supplements and more. The company’s recent operating results have benefited (unfortunately) from the war in Ukraine as grain prices and agricultural markets globally experienced strong price increases. ADM is positioned well to benefit from the volatility due to its stable North American agricultural base.”
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Disclosure. None. 10 Best Agriculture Stocks To Invest In is originally published on Insider Monkey.
