Governments around the world provide 6B in annual subsidies to this industry alone – and billionaire investor Mario Gabelli is getting in on the action.  Here’s how you can too.

Governments around the world provide $536B in annual subsidies to this industry alone – and billionaire investor Mario Gabelli is getting in on the action. Here’s how you can too.

Governments around the world provide $536B in annual subsidies to this industry alone - and billionaire investor Mario Gabelli is getting in on the action.  Here's how you can too.

Governments around the world provide $536B in annual subsidies to this industry alone – and billionaire investor Mario Gabelli is getting in on the action. Here’s how you can too.

The stock market is a scary place right now. The S&P 500 and Nasdaq are both deep in the red year to date. With raging inflation and an aggressive FED, the outlook doesn’t seem all that bright either.

But chairman and CEO of GAMCO Investors Mario Gabelli still sees opportunities on the horizon – particularly in agriculture.

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“We want to buy agricultural companies,” the billionaire investor tells CNBC. And for good reason. The agricultural industry receives billions of dollars in global subsidies each year.

In 2020, the Organization for Economic Co-operation and Development found that governments around the world give an average of $536 billion in direct support to farmers.

Gabelli points to two names he particularly likes from the sector.

Deere (DE)

Commanding more than $100 billion of market cap, Deere is one of America’s largest manufacturers of agricultural machinery and heavy equipment. So it’s no surprise that the stock is on Gabelli’s list.

“We like companies like Deere,” he says.

Despite supply chain pressures, Deere’s net sales rose 25% year over year in the quarter ended July 31. At the same time, the company earned net income of $1.88 billion, or $6.16 per share, which represents a significant increase from the $1.67 billion, or $5.32 per share in the year-ago period.

The stock was also resilient amid a broad market selloff.

Year to date, Deere shares are up 5.5%, in stark contrast to the S&P 500’s double-digit percentage decline.

Industrial CNH (CNH)

CNH Industrial is a British-American equipment and services company. Although the company is not as big as Deere in terms of market cap, its Case and New Holland brands have built entrenched positions in the agriculture and construction machinery industry.

“We particularly like right now: Case New Holland,” Gabelli tells CNBC.

“There are 1.3 million shares, and the stock is about $12. We think they can earn a buck and a half to $2, within 12 months.”

In fact, the company is growing its bottom line. In Q2, CNH Industrial’s adjusted diluted earnings per share came in at 43 cents, up from 37 cents earned in the same period last year.

Consolidated revenue was $6.08 billion for the quarter, representing a 17.5% year-over-year increase. This was driven by 19% growth in net sales from the agricultural sector to $4.72 billion.

Still, CNH Industrial shares are down 25% so far in 2022. If you agree with Gabelli’s opinion, the company could be a contrarian opportunity.

More ways to invest in agriculture

Agriculture is a recession-proof industry. Concerns about global food shortages have already resulted in strong prices for agricultural commodities.

For a convenient way to get broad exposure to the sector, check out the Invesco DB Agriculture Fund (DBA). It tracks an index made up of futures contracts on some of the most traded agricultural commodities – including corn, soybeans and sugar.

Investors can also use ETFs to gain exposure to individual agricultural commodities. Teucrium Wheat Fund (WEAT) and Teucrium Corn Fund (CORN) gained 20% and 28%, respectively, in 2022.

Last but not least, you can consider investing in your own farmland. After all, Gabelli isn’t the only billionaire bullish on agriculture: Bill Gates now happens to be the largest private owner of farmland in the US

It’s easy to see the appeal of this asset class: markets can go up or down, but no matter what happens, people still need to eat. This makes farmland inherently valuable.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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