Maxx Chatsko, Brian Feroldi, and Demitrios Kalogeropoulos
Jul 19, 2019 at 11:11AM
Energy, Materials, and Utilities
The United States churns out 22% of total global gross domestic product (GDP) but is home to just 4.3% of the total human population. All of that capital and a consumption-driven economy makes America a prime destination for international companies looking to sell their latest wares. But does your portfolio have any exposure to businesses based outside of the United States?
The usual due diligence applies when poring over international companies, of course, but first you have to know where to look. We asked three contributors at The Motley Fool for a foreign company they’re watching that is ramping up its exposure in the United States. Here’s why they chose Nutrien (NYSE:NTR), Toyota Motor (NYSE:TM), and Canopy Growth (NYSE:CGC).
Image source: Getty Images.
Digital agriculture for improved farm economics
Maxx Chatsko (Nutrien): You likely already use some of the Canadian-based fertilizer company’s products, albeit indirectly. But the distance between American consumers and the company will be closing in the next decade. Nutrien has announced a goal to increase its market share in the $40 billion U.S. agricultural retail market from 20% today to 30% in the coming years. The strategy for achieving that might catch the attention of investors.
Nutrien has been quietly positioning itself for the future of agriculture by expanding its offerings in novel biologics (living technologies that boost crop yields while reducing chemical inputs) and digital agriculture. The latter could soon be the leading platform available to U.S. farmers thanks to the company’s dominant position in retail.
Digital agriculture works relatively simply. Customers subscribe to the core platform, which provides farmers data collected from satellites and historical climate patterns for their land, sometimes with resolution down to each row of crops. Farmers can then more accurately time purchases and sales of products, seed planting, fertilizer and pesticide applications, and harvests. The idea is to give farmers the power to make data-informed decisions to increase yields and profits.
Nutrien announced that its digital agriculture platform was being used by customers representing over 50% of its North American retail sales just six months after launch. That’s equivalent to $6.3 billion in annual revenue. And that figure doesn’t account for acquisitions made in 2019 or a recently announced partnership to integrate with digital offerings from BASF.
In other words, the food on your table might soon be grown with a helping hand from digital agriculture. Considering the massive opportunity, the fact Nutrien shares sport a 3.3% annual dividend yield, and the fact that the business is on pace to steadily grow profits in fiscal 2019, investors might want to take a closer look.
Image source: Getty Images.
The electrification wave is here
Brian Feroldi (Toyota Motors): Tesla has shaken up the automotive market by proving that there is a lot of pent-up demand for great electric vehicles. Nearly every major automaker is now scrambling to meet that demand and electrify its fleet.
Toyota Motor was one of the first major automakers to embrace batteries in a big way with its move into hybrids more than a decade ago, but it’s been much slower with the introduction of all-electric vehicles. But that’s about to change. Toyota has announced plans to bring “more than 10” battery-electric vehicles to market within the next few years. Its initial focus will be on the Chinese market, but it plans on turning that focus to the U.S. soon after.
Toyota has also promised to electrify its entire fleet of Toyota and Lexus cars by the mid-2020s. This suggests that U.S. consumers will soon be able to purchase all-electric versions of Toyota’s best-selling cars, such as the Camry, Corolla, and Highlander.
The big question for investors is whether or not there will be demand from consumers to purchase these all-electric vehicles once they’re finally available. Tesla is currently the far-and-away leader in this market, and its Model 3 is generating more revenue in the U.S. than even the most popular gas-powered cars such as the Camry and Honda Accord. Toyota might have a hard time breaking into that market and wrestling away market share from a rival that’s had such a big head start.
The good news here is that all of the incoming competition will likely be a major win for consumers. More electric car choices should lead to lower prices and better cars over time.
Image source: Getty Images.
It’s high time for some new competition
Demitri Kalogeropoulos (Canopy Growth): In contrast to Canopy Growth’s home country of Canada, federal law prohibits the company from manufacturing, selling, or distributing marijuana here in the U.S. And the prospect of that changing anytime soon is cloudy at best.
Yet Canopy Growth is adding a significant presence in this country right now, one that’s aimed at satisfying booming demand for hemp and for cannabidiol (CBD)-infused products that include everything from skin creams to shampoos to beverages. Some estimates have the CBD market cracking $20 billion in the U.S. in just a few years.
Of course, Canopy Growth is doing its best to position itself to dominate the market in the event that marijuana legalization does occur on the federal level. As the industry’s biggest company, with influential partnerships such as alcoholic beverage giant Constellation Brands, Canopy has a good shot at gaining a foothold in what could be a massive consumer industry. But for now investors will be watching to see if the company can replicate its early-mover advantages in Canada as it tiptoes into the U.S. market.
Brian Feroldi owns shares of Tesla. Demitrios Kalogeropoulos owns shares of Tesla. Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.”>