Agronomics (LSE: ANIC) isn’t a penny stock for the faint of heart. It’s up 93% year to date, yet has fallen nearly 20% in just a month. Meanwhile, the long-term share price chart looks like something a snowboarder would have lots of fun riding down.
But co‑founder and executive chairman Jim Mellon reckons the uber-disruptive industry that the company’s involved in could become a money fountain. So should I load up on this penny stock at 7p? Let’s explore.
Agro… what?
Agronomics is a leading investment company in the field of cellular agriculture. This involves growing meat, milk, and other products from cells instead of farming animals.
How’s that possible? Scientists take a small sample of animal cells (say, cow muscle) and grow them in a nutrient-rich environment like a bioreactor. The cells then multiply into muscle tissue.
The result? Real meat, but without raising and slaughtering animals.
Moreover, this method requires significantly less land and water, and can greatly reduce greenhouse gas emissions associated with animal waste. Lab-grown seafood also helps alleviate overfishing.
Traditional meat production carries a risk of contamination from bacteria like E. coli and involves the widespread use of antibiotics. By contrast, clean meat (as lab-grown meat’s often called) avoids these risks and can be produced without antibiotics.
Venture capital
Agronomics has screened over 400 start-ups, whittling this down to around 20 of the most promising. Top holdings include Liberation Labs (precision fermentation), SuperMeat (lab-grown chicken), BlueNalu (cultivated seafood), and Meatable (lab-grown pork).
Earlier this week, Meatable acquired the UK’s Uncommon Bio. CEO Jeff Tripician said: “This [acquisition] enables us to support the meat industry with a stable, secure, and future-proof supply of species like pork, beef, lamb, and poultry.”
In June, Agronomics calculated its net asset value per share at 14.40p. With the stock currently at 7.5p, this suggests a massive discount to the underlying value.
High-risk stock
However, it’s important to understand why this discount might exist. None of the companies have gone public yet and many are early-stage and therefore pre-revenue. There’s no guarantee any of them will ever find commercial success.
Meanwhile, Agronomics will likely need to issue new shares to raise cash for follow-on investments.
Finally, it’s unlikely shoppers in Tesco will soon be throwing a load of cultivated steaks into their trollies. Consumers might treat lab-grown meat with suspicion.
Millionaire potential?
Looking ahead, the United Nations suggests a 60% increase in food production will be needed to feed the world’s population by 2050. As such, Agronomics says the cultivated meat market could be worth $200bn by 2040.
It would only need a handful of portfolio winners to be worth a lot more than its current £75m market-cap. Success could be commercial or its start-ups being acquired by giant food companies.
A massive flow of capital is anticipated to enter the sector in the coming decade led by the necessity to improve supply chain resilience price stability and nation-states seeking food security.
Agronomics.
Of course, whether the stock becomes a millionaire-maker depends on how much is invested. If Agronomics regained its mid-2021 high of 35p, the return would be nearly 400%. That’s great, but not get-rich stuff.
However, adventurous investors might consider including this intriguing penny stock as a small part of a diversified portfolio.
