In this article, we will look at the 13 best farmland and agriculture stocks to invest in according to hedge funds.
Revolutionizing Agriculture: Technology in Modern Farming
The farmland and agriculture sector is crucial for global food security and economic stability. As the world population continues to grow, the demand for food increases, necessitating innovative practices in agriculture and farming. Recent trends indicate a significant shift towards technology-driven agriculture, which aims to enhance productivity while promoting sustainability.
In the first quarter of 2024, McKinsey surveyed around 4,400 farmers across Europe, India, Latin America, and North America to understand the factors influencing their profitability and technology adoption. The firm conducted a similar survey in 2022. The findings indicate that while farmers are increasingly adopting technology, the pace remains slow, with a three-percentage-point rise since 2022 in those using or willing to use at least one new digital tool to improve operations.
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North American farmers lead in technology adoption. In the US, 61% of farmers are using or willing to adopt digital agronomy. Additionally, 51% are using or willing to adopt precision agriculture hardware, and 38% are adopting remote-sensing technologies. Latin America showed the most significant growth in technology adoption, with a remarkable ten-percentage-point increase from 2022 to 2024. Farmers around the world are more inclined to adopt new technologies that directly improve operations. According to the data, digital agronomy and precision agriculture hardware are the most popular technologies around the world.
The survey highlights that in the US, larger farms are 45% more likely to adopt agricultural technology compared to smaller farms. This trend can be attributed to the greater scale needed for a favorable return on investment (ROI) in agtech. Despite the challenges posed by rising input costs and extreme weather conditions, farmers are looking towards sustainable practices and innovative technologies to enhance their productivity and profitability. Organizations that provide technology and services have a unique opportunity to cater to farmers’ diverse needs across different regions.
With this background in mind, let’s take a look at the 13 best farmland and agriculture stocks to invest in according to hedge funds.
A farmer walking through a lush green field of freshly harvested agricultural products.
Methodology
To compile our list of the 13 best farmland and agriculture stocks to invest in according to hedge funds, we used the Finviz and Yahoo stock screeners to find the largest farmland and agriculture companies. We also reviewed our own rankings and consulted various online resources.
From an initial pool of more than 30 farmland and agriculture stocks, we focused on the top 13 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q3 2024 database of 900 elite hedge funds. The 13 best farmland and agriculture stocks to invest in are ranked in ascending order based on the number of hedge funds holding stakes in them, as of Q3 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
13. Ingredion Incorporated (NYSE:INGR)
Number of Hedge Fund Holders: 26
Ingredion Incorporated (NYSE:INGR) is a leading global ingredient solutions provider and a major player in the farmland and agriculture sector. The company turns grains, fruits, vegetables, and other plant-based materials into valuable products and solutions for the food, beverage, animal nutrition, brewing, and industrial markets. Ingredion Incorporated (NYSE:INGR) has shown strong financial performance and strategic growth initiatives, making it an attractive option for investors.
In the third quarter of 2024, the company reported impressive results with a 26% increase in reported operating income and a 29% increase in adjusted operating income. The adjusted earnings per share (EPS) rose to $3.05, marking a 31% increase from the previous year. This growth was driven by effective contract management and operational excellence across all segments, which experienced double-digit operating income growth.
Despite facing challenges such as input and wage cost inflation, Ingredion Incorporated (NYSE:INGR) successfully adjusted pricing through multiyear contracts with customers, which helped recover margins. The company also achieved structural savings through its cost-to-compete program, which aims to deliver $50 million of run-rate savings by the end of 2025.
Additionally, Ingredion Incorporated (NYSE:INGR) ramped up production at its facilities in Cali, Colombia, and Mexico City after optimizing operations with minimal capital expenditures. Looking ahead, the company is committed to investing in capacity expansion and network optimization projects. These initiatives are designed to support the company’s long-term growth strategy while maintaining a strong focus on cost management. This focus on enhancing production efficiency positions Ingredion Incorporated (NYSE:INGR) well for future growth.
12. The Scotts Miracle-Gro Company (NYSE:SMG)
Number of Hedge Fund Holders: 28
The Scotts Miracle-Gro Company (NYSE:SMG) is a multinational manufacturer of branded consumer lawn and garden products, including fertilizers, plant foods, and pest control solutions. The Scotts Miracle-Gro Company (NYSE:SMG) ranks among the best agriculture stocks to invest in according to hedge funds.
The Scotts Miracle-Gro Company (NYSE:SMG) has faced challenges in recent years, including high debt and an unsustainable cost structure due to fluctuating demand post-pandemic. However, the company took significant steps to mitigate these issues by cutting over $400 million in operating expenses. The company also restructured its Hawthorne Gardening Company to make it smaller and more profitable. These measures helped The Scotts Miracle-Gro Company (NYSE:SMG) maintain its dividend and avoid issuing new shares.
Fiscal 2024 marked a significant recovery for the company as it shifted its focus to future growth. In its fiscal fourth quarter of 2024, The Scotts Miracle-Gro Company (NYSE:SMG) reported total net sales of $414.7 million, an 11% increase compared to the previous year. The US Consumer segment saw remarkable growth, with sales rising by 54% to $309.7 million, primarily due to improved shipment timing.
The Scotts Miracle-Gro Company (NYSE:SMG) plans to invest at least $200 million annually in advertising and marketing to achieve consistent growth of around 3% each year. The company aims to improve gross margins into the mid-30% range and reduce its debt leverage to approximately 3x by the end of fiscal 2027.
In fiscal year 2025, The Scotts Miracle-Gro Company (NYSE:SMG) intends to expand its Miracle-Gro Organic line and introduce new products, reinforcing its commitment to sustainability. The company also aims to introduce a new O.M. Scotts & Son natural lawn fertilizer and grass seed, featuring eco-friendly packaging. With a clear strategy focused on innovation and efficiency, The Scotts Miracle-Gro Company (NYSE:SMG) is well-positioned for future growth.