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A penny inventory that appears dirt-cheap to me on paper is Agronomics (LSE: ANIC). Might the shares soar and may I purchase some for my holdings? Let’s take a better look.
Investing in meals
Agronomics is a UK-based funding agency. It focuses on funding into the meals trade, particularly extra environmentally pleasant options of in style foodstuffs in comparison with historically produced meat and plant-based meals.
Agronomics shares are at present buying and selling for 9p. The shares have fallen 40% in a yr, as they have been buying and selling for 15p presently final yr. It’s not unusual for a penny inventory like this to expertise such volatility.
Encouraging market and indicators of growth
Agronomics invests in new companies particularly within the nascent mobile agriculture trade. In easier phrases, that is the manufacturing of agriculture merchandise straight from cells, moderately than elevating an animal for slaughter. There are two facets to think about right here. Firstly, the worldwide marketplace for meat and poultry is large, price over $1trn. Subsequent, the rise in consciousness round animal cruelty has led to a significant spike in customers in search of vegan, plant-based, and cruelty-free options. If Agronomics’s science is right, there’s a enormous propensity for development right here, for my part.
Subsequent, the sector on the whole appears to be transferring in a optimistic course. Earlier this yr the US Division for Agriculture (USDA) gave two meals tech companies permission to promote lab-grown poultry. Certainly one of these companies, Upside Meals, is a non-public start-up. It’s at present within the portfolio of well-known funding administration agency Scottish Mortgage Funding Belief.
Lastly, a few the folks concerned in Agronomics have glorious expertise of build up smaller companies within the client manufacturers area and promoting later for giant cash. Richard Reed, a non-executive chair, co-founded Harmless Drinks, a smoothie enterprise ultimately snapped up by Coca-Cola for £320m. Profitable trade expertise can generally separate doubtlessly profitable start-ups from others, for my part.
A penny inventory with dangers
One of many greatest points for Agronomics is the truth that the price of manufacturing these different meals is excessive proper now. These increased prices might hamper profitability and development initiatives, except know-how develops and prices may be reduce down considerably.
One other danger for me right here is that one of these foodstuffs might by no means develop into in style or mainstream. Will it style precisely the identical? Or might it go the identical means as plant-based meals? A few of these have struggled to garner the eye of the plenty and translate into gross sales and revenue.
General, at 9p a share, with no debt on its books and a cash-rich steadiness sheet, I’ve determined so as to add some Agronomics shares to my holdings. I’ll be shopping for a small variety of shares. If the enterprise doesn’t take off, I’m not shedding an excessive amount of cash. There’s doubtlessly a excessive reward right here and I feel the shares might soar, however there are many dangers to think about too. At 9p a share, I’m not too anxious and take into account this penny inventory a little bit of a free hit for me and my holdings.
