Best Vertical Farming Stocks for the Agricultural Shift

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May. 25 2021, Published 12:27 p.m. ET

There are points in the stock market where impact investing and value investing intersect. That's the case with vertical farming stocks. They help fund the expansion of food production without relying on an immense amount of land and resources to get the job done. Meanwhile, their value might be higher than the market is currently giving them credit for.

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Many startups are still in the venture funding phase, but these vertical farming public companies might be a good investment now.

AppHarvest is a newer vertical farming stock.

Having just gone public on Feb. 1 via a reverse SPAC merger, AppHarvest (NASDAQ:APPH) is showing potential despite volatility. Early investors in the company's blank-check firm Novus Capital have seen a return on their initial investment.

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The company's market cap of $1.58 billion looks promising to retail investors. Analysts have given APPH stock a buy rating. The target price is $42, which would be an approximately 170 percent boost from the current trading price of $15.78.

In true value stock fashion, Kentucky-based AppHarvest expects $21 million in net revenue from just 60 acres of vertical farming capacity. The high-tech brand shows great potential with a keen eye for innovation.

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Hydrofarm Holdings is a vertical farming stock out of Pennsylvania.

Pennsylvania isn't all big oil and fracking. The state also produces environmental advancements like vertical farming, and Hydrofarm Holdings Group Inc. (NASDAQ:HYFM) is evidence. The 44-year-old brand went public at the end of 2020 and has gone on a bit of a ride. However, the stock has lots of potential.

HYFM stock has lifetime earnings of 12.5 percent, with YTD earnings marginally in the red. The company has faltered since its February peak. Still, the correction could be a solid entry point for investors interested in long-term growth.

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Hydrofarm is set to acquire House & Garden, a multi-touchpoint operation worth $125 million, according to the terms of the deal. This strategic acquisition shows that Hydrofarm is growth-minded and won't be boxed.

Looking at vertical farming from a different lens with Xylem

Indoor vertical farms require water desalination technology, which is exactly where Xylem Inc. (NYSE:XYL) comes into play. This is just one example of a water treatment company functioning at a publicly traded, commercial scale.

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XYL stock has increased 359 percent over its decade-long public market history. YTD, shares are up 16.7 percent. 

Plus, the dividend yield of 0.96 percent gives investors an annual dividend of about $1.12 per share. Automatically reinvesting the quarterly payouts can compound your earnings passively.

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Vertical farming doesn't have to be the be-all-end-all for a company. Investors can diversify with brands like Xylem, which are contributing to vertical farming's rise.

Expect more public vertical farming stocks to come

This niche agricultural sector is just getting started. Aerofarms is expected to go public via a SPAC called Spring Valley Acquisition Corp. (NASDAQ:SV) in the near future. As land becomes harder to come by and efficient, eco-minded farming becomes the norm, vertical farming stocks will be at the forefront.

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