I’ve been searching for the right stock to boost the performance of my Stocks and Shares ISA, and penny stock Agronomics (LSE: ANIC) ticks the boxes.
When digital meets physical
Today, we have programmed almost everything there is to program in the digital world. Much of the infrastructure that will be digitally created has arguably been created, and is merely being expanded upon today.
Dating far back to the rise of stem cell therapy – Dolly the sheep comes to mind as a landmark breakthrough – we have not had much luck in the programming or reprogramming of the physical world (or at least it has been a lot slower in developing than many thought back then). That is all changing, and this is where I feel the investment opportunities undoubtedly lie today.
Technology has, and will continue to, converge with and disrupt every sector to the extent that new markets are built and old ones are toppled. Supply chains will be re-routed and built anew. Now this is where biotech — and in particular, synthetic biology — has a leading role to play in the future, by tweaking, tuning and recreating an undistinguishable version of the physical.
Investing in the sustainable mega-trend
With that being said, the investment case for Agronomics is clear. It invests in companies with technology that can provide me with exposure to cellular agriculture (in other words – meat grown from cell cultures in labs) and the ability to disrupt the food production market. The market here is being made as we speak, with both Meticulous Research and McKinsey & Company both projecting the animal-free food market to be worth £20bn by 2030, touting a compound annual growth rate (CAGR) of 19% until then.
The company itself states that “the adoption of new technologies and processes is vital to address the damage to the natural environment”. In an age where climate change, animal welfare, health and sustainability are at the forefront of socially conscious minds, consumers seem to agree. This is demonstrated by the growing adoption of a vegan lifestyle.
Not only that but companies like Starbucks, McDonalds, Subway and Burger King now provide meat-alternative options and have announced targets to be substantially meat-free by the end of the decade. The trend is clear, and the opportunity to decouple supply chains from animals and the environment is one that will not be missed.
Scarcity prevails… for now
Analysing Agronomics, I can see that the business would be considered expensive with a price-to-earnings ratio of 50. The company has traded at a premium since listing, so this is no surprise.
Higher multiples are often paid, however, for companies operating within a game-changing sector and delivering the kind of growth that Agronomics has so far. Moreover, it also enjoys the benefit of scarcity value as the only UK-listed investment vehicle targeting cellular agriculture.
That being said, Agronomics will also face stiff competition in the future from established companies with deeper pockets, as firms like Tyson Foods, Kraft Heinz and even Amazon enter the picture — increasing economies of scale will also be key to widespread adoption.
Taking the above into account, Agronomics owns an impressive suite of disruptive companies and presents a huge long-term growth opportunity for my Stocks and Shares ISA.