AI goes to the farm: How to invest in the agricultural revolution

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Today’s issue in preview:

• AI goes to the farm: How to invest in the agricultural revolution

• Airlines are charging us high prices because they can. That’s a powerful investment message.

• This tech industry is poised to soar in value and adoption. These stocks will benefit.

• Learn our Top Themes to buy now

Airlines are charging us high prices because they can. That’s a powerful investment message.

Credit: CHUYN

If you want to get a lively complaint session going at your next barbecue, just bring up how expensive plane tickets are these days.

Immediately upon mentioning the subject, your friends and family will burst forth with detailed gripes about how much spring break or their trip to see their sister just cost them. Everybody has noticed flight costs are soaring. Airfare in the U.S. in June was up 26.5% compared with a year earlier, according to the latest federal data.

Rising fuel prices are partly to blame, but airlines are also charging high prices just because they can.

Flights cost an arm and a leg, and we continue to buy them. Because the U.S. economy is stronger than almost everyone in the mainstream media gives it credit for… and the airline business is booming.

As evidence, we present the new all-time high in the U.S. Global Jets ETF (JETS) and its constituents, such as Delta Air Lines (DAL), JetBlue (JBLU), and United Airlines (UAL).

Over the past ten months, I’ve written dozens of research notes that analyzed the soaring share prices of trucking stocks, industrial stocks, diesel engine makers, steelmakers, shopping mall operators, and hotel chains.

At the end of each note, I pointed to their soaring stock prices and told readers that the U.S. economy is doing much better than most people think

Each of the above industries is highly sensitive to ups and downs in the U.S. economy. Their fortunes rise and fall with America’s ability to build infrastructure projects, go on vacation, transport goods, spend money at the mall, and generally just “get along.” And most people don’t realize this, but stock prices in those industries are booming.

This exceptional price strength across a broad swath of critical companies, which are highly sensitive to U.S. economic health, suggests the economy is actually doing very well. Industries involved in making things, transporting things, and buying things are enjoying growing revenues and rising stock prices.

And keep in mind: The stock market is one of the world’s greatest forecasting mechanisms. It tends to look ahead 6-12 months. When an industry is in a recession, its stock prices will rise before the news media says it is recovering. When an industry seems to be doing well, its stock prices will decline before the news covers its downturn. This is often called “discounting the future.”

The stock prices of large U.S. airlines are another important “real world” indicator. The fortunes of these firms rise and fall with America’s ability to pay for vacations and travel for business. And their market values just surged to new multi-year highs.

You can read a thousand opinions and forecasts related to the Iran war, the new Fed Chair, or the direction of interest rates. However, there’s only one source of objective truth: Market prices.

Today’s market prices are the sum and current manifestation of all knowledge held by industry insiders, connected investors, government officials, and bankers who quietly control huge swaths of the economy. These people know 50 times as much about their industries of focus as you or I do.

Their knowledge manifests itself through action… and that action that sets market prices. Market prices are not always perfect, but most of the time, they know hell of a lot more than any economist, podcaster, X poster, or investment guru.

If you ever get brain overload from listening to or reading lots of “experts” espousing lots of conflicting opinions about a war, a technology, or the health of the economy, you can easily tune them out and focus on signals that contain more distilled insider knowledge in them than all those experts combined: Market prices.

Sure, the global economy has problems. It always does. But keep in mind: Making money in stocks is never about being in problem-free economic climates. It’s about being in economic climates where the big negatives are overwhelmed by the even bigger positives.

Right now, the big positives are driving the market values of critical and highly economically sensitive firms to new all-time highs. You can believe your opinions, someone else’s opinions, or something far more informed: The market. And the market says, “We’re booming. Trade accordingly!”

AI goes to the farm: How to invest in an agricultural revolution

Credit: Bruce Peter Morin

In late 2022, the revolutionary new AI program ChatGPT was released to the public. Since then, AI has proliferated into every area of the economy and become one of the most powerful financial forces in history.

It’s even making its way to the farm… and could make one of the world’s best manufacturing businesses even better.

As evidence, I present you the long-term uptrend in Deere & Company (DE), aka John Deere.

John Deere is America’s largest manufacturer of agricultural tractors and farm machinery. The company’s unique shade of green is a common sight in fields and farms across the country.

John Deere isn’t your typical 189-year-old stodgy manufacturing company, however. Bulls on the stock say it’s an AI company dressed as a tractor company.

Deere is often cited as one of the best ways to play the boom in big data analytics and AI because it has invested heavily in building its “precision farming” expertise and product suite.

This includes data analytics and machine sensory technology that allow farmers to precisely place seeds, apply fertilizer, and spray crops with pesticides… all of which help reduce farming costs and improve crop yields.

Deere is also rolling out autonomous operating features, which essentially turn tractors into farm robots.

Deere’s investment in technology and its massive manufacturing capacity give it a significant competitive advantage over its competitors.

Importantly, Deere employs a powerful business model we call the “Money Machine” model.

Businesses that produce expensive, complex, and specialized machines like tractors, locomotives, surgical robots, and jet engines make money not only on initial product sales, but they also enjoy recurring, high-margin revenue for years afterward by selling maintenance services, replacement parts, and consumable materials the machines constantly use up, burn up, and wear down.

Owning such firms gets even better: After a customer buys an expensive, specialized machine, he is usually “locked in” or “married” to its manufacturer. You want to stick with the original manufacturer’s specialized parts and service plans.

After all, if you buy a $4 million locomotive or a $500,000 tractor, you want to make sure it has quality replacement parts and expert ongoing maintenance. You don’t want to risk switching to a different firm in pursuit of saving a few bucks. So for better or worse, you’re married to the manufacturer… often for 7+ years.

The positives above have helped Deere stock appreciate by 90% in value over the past four years. As you can see in the chart below, the stock is close to breaking out to a new all-time high.

Deere is an excellent demonstration that when you have a megatrend as big and broad as AI or robotics, there are always many ways to benefit from it. Even a 189-year-old manufacturing company can adopt the technology and benefit from it.

Deere’s total addressable market for precision farming around the world is gigantic, so I bet this uptrend continues for a long time.

This tech industry is poised to soar in value and adoption. These stocks will benefit.

Credit: Stefan Aue

In today’s frenetic world, where you can get up-to-the-second market updates, prices, and opinions on your phone, in your car, on an airplane, it’s easy to forget where the powerful, glacier-like long-term trends are… and how they can make you a fortune.

This is where Money & Megatrends comes in. One of our core jobs is to get you on the right side of gigantic, multi-year tech, business, and demographic trends that shape our world and create enormous wealth.

We’re looking to invest in themes and industries with such massive runways for growth… with so much potential to create value for society… that could attract such large money flows… that financially, we are running downhill… and playing the game of wealth-building in “Easy” mode.

This brings us to one of our highest conviction long-term bets: The Robotics Revolution.

Over the past two years, I’ve urged friends and colleagues to become heavily involved in the robotics megatrend. It is one of the biggest financial opportunities of our lives.

At Money & Megatrends, we occasionally trade and track trends that last less than 12 months. The robotics megatrend will last more than 12 years.

It is a massive, multifaceted trend that will transform the world. It will yield greater factory automation, surgical robots, autonomous cars, autonomous air taxis, humanoid worker robots, and much more.

Within two years, Amazon will have more robots working for it than human employees.

According to the International Federation of Robotics, more than 700,000 new industrial robots will be installed annually by 2028, up from 542,000 in 2024. That represents roughly 30% growth in annual installations and about a 7% annual growth rate.

Interact Analysis forecasts the warehouse and factory mobile-robot market to expand at a 19% annual rate through 2030. Revenue is projected to rise from just under $5 billion in 2024 to $14 billion in 2030—nearly tripling in six years.

Like most long-term megatrends, this one has a variety of investment angles. Compelling individual companies include Kratos Defense (KTOS, drones), Tesla (TSLA, autonomous cars, humanoids), Fanuc (FANUY, factory robots), Cognex (CGNX, machine vision) Ambarella (AMBA, machine vision), and Symbotic (SYM, factory robots).

ETF-focused investors can consider the ROBO Global Robotics and Automation ETF (ROBO), the Global X Robotics & AI ETF (BOTZ), and the ARK Autonomous Technology & Robotics ETF (ARKQ).

Speaking of such ETFs, a four-year chart (below) of ROBO provides a good long-term perspective of this megatrend.

As you can see by taking the “long view,” the robotics industry is in a clear uptrend. This means the industry is enjoying the strong tailwinds I forecasted years ago. An investor in robotics is financially “running downhill” right now and will be for years.

Market Notes

• Our recommendation to invest in the AI boom via Dell Technologies (DELL) continues to pay off. The stock reached a new all-time high this week.

• Our recommendation to invest in the genomics bull market continues to pay off. Leading synthetic DNA firm Twist Biosciences (TWST) reached a new all-time high this week.

• The American consumer lives… and is spending with enthusiasm. Expensive drinkware and cooler maker Yeti Holdings (YETI) reached a new one-year high this week.

• The bull market in biotechnology continues. Biotech giant Amgen (AMGN) reached a new all-time high this week.

• The American consumer is spending plenty on travel. Online travel giant Expedia (EXPE) reached a new all-time high this week.

Regards,

Brian Hunt
Editor, Money & Megatrends

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