My home state of Kansas is known for its aircraft manufacturing, but the backbone of the state’s economy is agriculture.
More than 87% of its land is used for farming. That’s more than 45 million acres.
Every year, crews migrate from Texas, through Kansas, to Canada, harvesting wheat crops to make bread, pasta, pizza and more.
Simultaneously, dust clouds billow across the state as harvesting crews and their massive equipment move through Kansas before heading to Nebraska.
That production is the heart of the Kansas economy.
I found one little-known, high-rating agriculture stock to buy. It’s poised for a big breakout in 2021 and beyond as farmers get back to work after the COVID-19 pandemic.
The company rates a 95 overall on Adam O’Dell’s six-factor Green Zone Ratings system.
And I spotted a trend in farming that makes this company even more attractive.
Farm Income on the Rise = Agriculture Stock to Buy
In 2013, American farms were in fantastic shape when it came to finances.
Net farm income in the U.S. reached a high of $123.7 billion.
If you’re not familiar with Congress and the Farm Bill, just know that American farmers who produce staples such as corn, soy and wheat can get government payments or subsidies.
In the ensuing years, as the prices of these commodity crops fell, the government paid farmers less.
This caused one of the biggest year-over-year drops in net income in history.
By 2016, net farm income had fallen nearly 50%, to $62.2 billion.
After 2016, as commodity prices rose, the government began increasing payments to farmers.
By 2019, net farm income reached more than $93 billion.
When a farmer makes more money, they’re inclined to invest more in their operations.
This means buying more land to farm, hiring more farmhands and upgrading equipment — leading me to a great recommendation to play this trend.
Farmers Will Invest In Equipment
In 2019, the U.S. Department of Agriculture said that farmers spent nearly $12 billion on tractors and large farm machinery.
It was more than double what they spent on other farm machinery, trucks and other vehicles combined.
One of the largest producers of tractors and large farm machinery is AGCO Corp. (NYSE: AGCO).
Under its Massey Ferguson brand, the company sells tractors that cultivate soil and produce crops.
It also offers hay balers, harvesters, spreaders and grain storage bins … all the products that make farms operate.
After flat income in 2019 and 2020, AGCO’s revenue is projected to reach $11 billion by 2023.
The company expects to sell more of its farm products as commodity prices increase and government subsidies to farmers rise.
AGCO Stock Gained 267% in 12 Months
In the last year, AGCO stock has been on a solid upward trajectory.
The price hit below $40 per share during the March 2020 coronavirus crash, but it reached a new 52-week high of $143 this week.
This stock fits the “buy high, sell higher” Momentum Principle that Adam O’Dell, Charles Sizemore and I follow.
Its 267% rise is better than its peers. The machinery manufacturing average gain is 130%.
Adam’s Green Zone Ratings system scores AGCO a 95 overall — meaning only 5% of all other stocks rate higher.
AGCO Corp. Green Zone Rating on March 22, 2021.
We are “Strong Bullish” on the stock and expect it to crush the broader market by three times over the next 12 months.
AGCO ranks in the green in five of the six factors, including quality (88), growth (86), value (85), momentum (85) and volatility (78).
The company ranks low on size (28). However, with a market value (shares outstanding times share price) of $10.8 billion, it’s nowhere near mega-cap territory.
Bottom line: Agriculture remains the backbone of Kansas’ economy as well as the entire nation.
Farmers benefit from a rise in commodity prices and government subsidies. It gives them the flexibility to upgrade their equipment and make higher profits.
AGCO Corp. is the agriculture stock that gives us a perfect opportunity to buy high today and sell higher in the coming months.
Safe trading,
Matt Clark
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He’s the host of our podcast, The Bull & The Bear, as well as the Marijuana Market Update. Before joining the team, he spent 25 years as an investigative journalist and editor — covering everything from politics to business.
