7 Best Algae and Biofuel Stocks to Buy Now

5. Adecoagro S.A. (NYSE:AGRO)

Number of Hedge Funds Holders: 18

Next, on our list of the 7 best Algae and Biofuel Stocks to Buy Now, we have Adecoagro S.A. (NYSE:AGRO), which is an agro-industrial company that operates through two major segments. One segment is farming, where the company produces a wide range of agricultural commodities, including wheat, corn, soybeans, and rice, as well as dairy products like raw milk, cheese, cream, cocoa-flavored milk, and chocolate milk. This segment also produces electricity by using cattle biomass as fuel. The other segment focused on the production of ethanol and energy.

Adecoagro S.A.’s gross sales decreased by 2.3% year-over-year in Q2 2024. However, adjusted EBITDA increased by 2.7%, driven by the crop segment outperforming the market and improved dairy operations. Adjusted EBITDA in the sugar, ethanol, and energy segment was $106.9 million, mainly driven by higher crushing volumes year-over-year.

Additionally, improved cost dilution allowed the company to reduce expenses, thereby improving profitability. Conversely, EBITDA in the farming business rose to $37.8 million, reflecting 55% year-over-year growth. Increased farm sales, along with gains in biological assets and agricultural products, were the main drivers of this substantial financial improvement.

In light of its improved financial performance, Adecoagro S.A. (NYSE:AGRO) allocated 49% of the free cash flow generated in 2023 to distribution. This amounts to $86.4 million, including a cash dividend of $35 million. Adecoagro S.A. already distributed a cash dividend totaling $17.5 million in May 2024 and plans to distribute the remainder in November. As a result, strong dividend expectation can lead to a surge in share price.

Declining sales due to increased ethanol production in Brazil and higher selling costs from increased taxation are concerns that investors should keep an eye on. Nevertheless, two analysts have predicted an 18% upside in the share price, as Adecoagro S.A. indicated that the increased production has been absorbed by the market, leading to a recovery in share price. As such, 18 hedge funds are bullish on the stock, with investments worth of $151 million as of Q2 2024.