“We can say without reservation that, in investing, spinoffs are the closest thing you can find to a sure thing. It all comes down to the incentives when companies spin off a subsidiary or division and hand out shares to their shareholders. Study after study has shown that after an initial adjustment period of a few months, spinoffs tend to outperform groups of comparable stocks for several years….” Pat McKeough shows how spinoffs and other “special situations” can create windfalls for informed investors.
Investing in the best agricultural stocks to buy can work out even better when the stock involved is a spinoff. Learn why, and which stock we’re talking about now.
Are you interested in the best agricultural stocks to buy? Corteva shares offer investors a number of attractive pluses: Not only is the company at the forefront of key agricultural trends, but a prominent activist continues to urge Corteva to make changes that may raise the company’s earnings and/or its stock price.
As well, the stock is a spinoff. It bears repeating: for several reasons, spinoffs are about as close as you can get to a sure thing in investing. It’s one key reason why we think Corteva has further gains ahead for investors.
They outperform comparable stocks for years
“We can say without reservation that, in investing, spinoffs are the closest thing you can find to a sure thing. It all comes down to the incentives when companies spin off a subsidiary or division and hand out shares to their shareholders. Study after study has shown that after an initial adjustment period of a few months, spinoffs tend to outperform groups of comparable stocks for several years….” Pat McKeough shows how spinoffs and other “special situations” can create windfalls for informed investors.
Corteva Inc., symbol CTVA on New York, is among the best agricultural stocks to buy
Corteva is a leader in vital and expanding agricultural markets. The company is a leading developer of new seeds and crop chemicals, including herbicides and insecticides, for the agriculture industry.
Corteva’s operations are managed through two segments: seed and crop protection.
The seed segment (54% of revenue) develops and supplies commercial seed that combines superior hereditary characteristics with science-advanced traits to produce high yield potential for farmers around the world.
The crop protection segment (46% of revenue) supplies products to protect crop yields against weeds, insects and disease to let farmers achieve optimal results.
Research is key to staying ahead of the competition
Corteva has so far stayed away from acquisitions, choosing instead to invest in its R&D and organic growth. The company spends a solid 8% of its sales on research and that lets it develop leading-edge products to stay ahead of its rivals.
Meantime, the company does enter into partnerships to supplement and build on its research.
For instance, in September 2021, Corteva signed a three-year agreement with Planet Labs Inc. to use its satellite imaging to further boost crop health and productivity. Planet Labs was founded in 2010 by three NASA scientists.
The deal deepened Corteva’s existing four-year-old partnership with Planet Labs. It also allowed the two companies to scale up their collection of precision farming data.
Corteva is already monitoring about 600,000 fields with the service. Other major agriculture players, like Bayer AG, BASF and Syngenta, also use Planet Labs’ technology. The U.S. Department of Agriculture is another client.
Agriculture companies and farmers are increasingly focused on ways to collect and crunch big data, which is seen as the next frontier in farming productivity. They’re using everything from sensors that record soil moisture and weather conditions in fields to high resolution images that detect plant diseases and other issues.
Planet’s latest technology fills data gaps left by existing satellite images. Those gaps, like cloud cover over agricultural lands, are overcome by bringing multiple views of the Earth into a single layer of data.
From spinoff to one of the best agricultural stocks to buy
Indianapolis, Indiana-based Corteva separated from DowDuPont in June 2019. DowDuPont shareholders got one share of Corteva for every three shares held in the parent. At the same time, DowDuPont also spun off Dow Inc. (symbol DOW on New York). The former parent then changed its name to DuPont de Nemours, and now trades on New York under the symbol DD.
DowDuPont originally announced the Corteva name in February 2018, saying it was derived from a combination of words meaning “heart” and “nature.”
Understanding the benefits of spinoff investing
The management of a parent company will only spin off the unwanted business if it’s fairly confident that this will pay off for shareholders in the long term, if not in the short. Generally, the parent company guesses right.
Companies that offer spinoffs do so when they feel it isn’t a good time to sell, and that probably means it’s a good time for investors to buy.
It pays to follow spinoff opportunities wherever you find them.
Spinoffs generally work out well over a period of several years for both the spun-off stock and its parent. As mentioned earlier, the management of a parent company will only hand out shares in a subsidiary to its own investors if it’s fairly confident that the subsidiary, and the parent, will be better off after the spinoff than before.
Parent companies may devote great effort to ensuring that the spinoff has adequate finances and strong management. They want the spinoff to succeed, for their own prestige, and because they want the spun-off stock to benefit its shareholders.
Use our three-part Successful Investor approach for all of your investments, including the best agricultural stocks to buy
Hold mostly high-quality, dividend-paying stocks.
Spread your money out across most if not all of the five main economic sectors: Manufacturing & Industry, Resources & Commodities, Consumer, Finance and Utilities.
Downplay or stay out of stocks in the broker/media limelight.
Consumer sentiment on GMO products varies. Does this worry you in regards to investing in these types of agricultural stocks?
How do you determine which agricultural stocks are good additions to your portfolio?
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