10 Best Vertical Farming and Hydroponic Stocks to Buy

In this article, we will be taking a look at the 10 best vertical farming and hydroponic stocks to buy.

The agriculture and farming sector has long been a vital part of not only financial markets but also day-to-day living for the global population. With global food insecurity being on the rise in recent years, this sector has become even more important and, thus also more burdened. To meet rising demand, increasingly dangerous agricultural practices have been adopted in the past, which have been taking an immense toll on the planet. Many climate change activists thus place the blame on agricultural practices for many current issues such as climate change, deforestation, and soil degradation. Because of this, innovations within the agriculture sector that enable sustainable, environmentally friendly, and affordable crop production have become necessary. Two such innovations are what we know as vertical and hydroponic farming.

What are Vertical and Hydroponic Farming?

Simply put, vertical farming is farming on vertical surfaces rather than horizontal surfaces. In this method, vertically stacked layers are used to enable farmers to produce more food on the same amount of land, if not less. In many cases, vertical farming is integrated into buildings such as greenhouses and even skyscrapers. However, much more accommodation has to be made for crops being grown with such a method. For instance, farmers have to ensure their crops have enough artificial temperature, light, and water. As such, the area where vertical farming is operative is almost highly controlled by experienced professionals to ensure no crops are lost or wasted.

Many agricultural and farming companies, such as Deere & Company (NYSE:DE), The Mosaic Company (NYSE:MOS), and Archer Daniels Midland Company (NYSE:ADM) have been focusing on sustainable agricultural practices. However, the companies operating directly within the vertical farming and hydroponics space have been leading the agricultural sector in terms of sustainability. Like vertical farming, hydroponic farming is another sustainable agricultural practice. In this method, farmers grow their plants using a water-based nutrient solution instead of soil. This agricultural practice has actually been around for a long time, so it’s not exactly a new innovation. According to the US Department of Agriculture (USDA), the process of growing plants in water culture or sand culture without soil is actually one that has been used by physiologists for over a century. However, with the means and technology utilized by companies working in this space today, the scope and effectiveness of this agricultural practice have grown to greater lengths than ever before.

American Support for Innovative Agriculture

The USDA has long been committed to increasing the scope of urban and innovative agricultural production on a local level. In 2021, the department announced a grant of $4 million to support this initiative. The 2021 grant was the second of its kind offered by the US government for this purpose, and it spanned two kinds of projects: Planning Projects and Implementation Projects.

Under the first category, the USDA attempted to encourage farmers, gardeners, citizens, government officials, schools, and any other stakeholders in urban and suburban areas to initiate projects targeting key areas of food access and more. Under the second category, the department aimed to accelerate the growth and progress of existing urban, indoor, and other agricultural practices to improve local food access.

The grants offered by the government in the past were only succeeded by even more generous opportunities in 2022. In October, the USDA again announced that it was investing $14.2 million in 52 grants to support urban agriculture and innovative production. This move was meant to expand the population’s access to nutritious foods and increase awareness of climate change, and the money promised in these grants further built on $26.3 million already invested in similar projects since 2020. Such stringent and enthusiastic efforts on the part of the government have managed to make vertical and hydroponic farming more widely practiced across the country and spell out only good news for the companies operating within this space. As such, we have compiled a list of some of the best vertical farming and hydroponic stocks to buy today since they may well skyrocket sometime in the near future.

Pixabay/Public Domain

Let’s now take a look at the 10 best vertical farming and hydroponic stocks to buy.

Our Methodology

To select the stocks for our list below, we used Insider Monkey’s hedge fund data for the fourth quarter, when 943 hedge funds were tracked. The stocks below are thus among the vertical farming and hydroponic stocks that many elite hedge funds are piling into today. We have ranked the stocks based on this metric, from the lowest to the highest number of hedge funds holding stakes in them. The data on each stock’s upside potential mentioned in the list below has been obtained from TipRanks.

Best Vertical Farming and Hydroponic Stocks to Buy

10. urban-gro, Inc. (NASDAQ:UGRO)

Number of Hedge Fund Holders: 1

urban-gro, Inc. (NASDAQ:UGRO) is an agricultural stock working to design, engineer, build, and integrate complex environmental equipment systems for indoor controlled environment agriculture. The company considers itself a truly integrated Design Build provider working in the vertical farming space.

On March 31, Maxim analysts reiterated a Buy rating on urban-gro, Inc. (NASDAQ:UGRO) shares.

The average price target placed on urban-gro, Inc. (NASDAQ:UGRO) is $7.50, and the shares were trading at $1.90 on May 1. This gives the stock an upside potential of 294.74%. Wall Street analysts view urban-gro, Inc. (NASDAQ:UGRO) as a Strong Buy, with there being three Buy ratings placed on the stock.

Citadel Investment Group was the largest shareholder in the company at the end of the fourth quarter, holding 15,131 shares. There was one hedge fund long the stock, with a total stake value of $41,000.

urban-gro, Inc. (NASDAQ:UGRO), like Deere & Company (NYSE:DE), The Mosaic Company (NYSE:MOS), and Archer Daniels Midland Company (NYSE:ADM), is a farming stock with immense potential.

9. iPower Inc. (NASDAQ:IPW)

Number of Hedge Fund Holders: 1

iPower Inc. (NASDAQ:IPW) is an online retailer and supplier of hydroponics equipment and accessories. It is based in Duarte, California.

Analysts see iPower Inc. (NASDAQ:IPW) as a Moderate Buy, with one Buy rating placed on the stock. In the fiscal second quarter of 2023, the company generated revenues of $19.25 million. This represents a revenue growth rate of 12.43% year-over-year. iPower Inc. (NASDAQ:IPW) also has an immensely low EV/Sales multiple of 0.37 (TTM). This shows the undervaluedness of the company relative to its potential.

One shareholder was long iPower Inc. (NASDAQ:IPW) in the fourth quarter, with a total stake value of $10,000.

8. Agrify Corporation (NASDAQ:AGFY)

Number of Hedge Fund Holders: 3

Agrify Corporation (NASDAQ:AGFY) is an agricultural company offering vertical farming units and Agrify Insights Software-as-a-Service software. It is based in Billerica, Massachusetts.

Agrify Corporation (NASDAQ:AGFY) is currently deeply undervalued relative to its potential since the stock has an EV/Sales multiple of 0.47 (TTM). The stock is up by 43.75% over the past month as of May 1. Agrify Corporation (NASDAQ:AGFY) has a gross profit margin of 9.39%.

Alyeska Investment Group was the largest shareholder in the company at the end of the fourth quarter, holding 1.2 million shares. In total, three hedge funds were long the stock, with a total stake value of $419,000.

7. Kalera PLC (OTCMKTS:KALRQ)

Number of Hedge Fund Holders: 4

Kalera PLC (OTCMKTS:KALRQ) is a hydroponic vertical farming company based in Orlando, Florida. It operates vertical hydroponic farms and similar technology development facilities to produce lettuce and micro-greens for the retail and food service markets.

This January, Kalera PLC (OTCMKTS:KALRQ) announced plans to achieve 74% cost savings by the end of 2023. It intends to operate its Houston and Denver farms at near-capacity levels to ensure these farms keep generating profits. Through 2023, Kalera PLC (OTCMKTS:KALRQ) expects its general and administrative expenses and operating losses to also fall by 65% compared to 2022.

Four hedge funds were long Kalera PLC (OTCMKTS:KALRQ) in the fourth quarter. Their total stake value was $6,000.

6. Village Farms International, Inc. (NASDAQ:VFF)

Number of Hedge Fund Holders: 5

Village Farms International, Inc. (NASDAQ:VFF) is a controlled environment agriculture-based, vertically integrated supplier of plant-based consumer packaged goods opportunities. It is based in Delta, Canada.

Shares of Village Farms International, Inc. (NASDAQ:VFF) were trading at $0.77 on May 1. The average price target placed on the stock by analysts on Wall Street is $2.31, with a high forecast of $3. This gives the stock an upside potential of 202%. Analysts also see Village Farms International, Inc. (NASDAQ:VFF) as a Moderate Buy since there are two Buy ratings and two Hold ratings on the stock.

Bourgeon Capital was the largest shareholder in the company at the end of the fourth quarter, holding 2,000 shares. A total of five hedge funds were long the stock, with a total stake value of $815,000.

Village Farms International, Inc. (NASDAQ:VFF), like Deere & Company (NYSE:DE), The Mosaic Company (NYSE:MOS), and Archer Daniels Midland Company (NYSE:ADM), is a farming stock many analysts view as a lucrative investment.

5. GrowGeneration Corp. (NASDAQ:GRWG)

Number of Hedge Fund Holders: 8

GrowGeneration Corp. (NASDAQ:GRWG) owns and operates retail hydroponic and organic gardening stores. It is based in Greenwood Village, Colorado.

Analysts at Stifel have placed a Hold rating on GrowGeneration Corp. (NASDAQ:GRWG) shares as of March 20.

 The average price target placed on GrowGeneration Corp. (NASDAQ:GRWG) is $4.85, and the stock was trading at $3.30 on May 1. This gives it an upside potential of 41.19%.

Eight hedge funds were long GrowGeneration Corp. (NASDAQ:GRWG) in the fourth quarter, with a total stake value of $11.7 million.

4. Local Bounti Corporation (NYSE:LOCL)

Number of Hedge Fund Holders: 9

Local Bounti Corporation (NYSE:LOCL) is a controlled-environment agriculture company using patent-pending Stack & Flow Technology. This is a hybrid of vertical farming and hydroponic greenhouse farming, used to grow healthy food sustainably.

A Buy rating was reiterated on Local Bounti Corporation (NYSE:LOCL) shares on April 3 by Roth MKM’s Brian Wright.

Analysts see Local Bounti Corporation (NYSE:LOCL) as a Moderate Buy, considering there are two Buy ratings on the stock. They have placed an average price target of $2.75 on the shares, which were trading at $0.51 on May 1. This gives the stock an upside potential of 2.75%.

Nine hedge funds were long Local Bounti Corporation (NYSE:LOCL) in the fourth quarter. Their total stake value in the company was $3.1 million.

3. AppHarvest, Inc. (NASDAQ:APPH)

Number of Hedge Fund Holders: 10

AppHarvest, Inc. (NASDAQ:APPH) is a vertical farming company developing and operating indoor farms with robotics and AI to build a climate-resilient food system. It is based in Morehead, Kentucky.

On March 7, Barclays analysts reiterated an Equal Weight rating on AppHarvest, Inc. (NASDAQ:APPH).

The average price target placed on AppHarvest, Inc. (NASDAQ:APPH) is $1.63, and the stock was trading at $0.47 on May 1. This gives it an upside potential of 246.81%.

Our hedge fund data shows 10 hedge funds long AppHarvest, Inc. (NASDAQ:APPH) in the fourth quarter, with a total stake value of $1.9 million.

2. Hydrofarm Holdings Group, Inc. (NASDAQ:HYFM)

Number of Hedge Fund Holders: 10

Hydrofarm Holdings Group, Inc. (NASDAQ:HYFM) manufactures and distributes controlled environment agriculture equipment and supplies for the vertical farming segment. It is based in Shoemakersville, Pennsylvania.

Analysts have placed an average price target of $1.90 on Hydrofarm Holdings Group, Inc. (NASDAQ:HYFM) shares. The stock was trading at $1.42 on May 1. This gives the stock an upside potential of 33.80%.

Hydrofarm Holdings Group, Inc. (NASDAQ:HYFM) was found among the 13F holdings of 10 hedge funds in the fourth quarter. Their total stake value was $3.4 million.

Baron Funds, an asset management firm, mentioned Hydrofarm Holdings Group, Inc. (NASDAQ:HYFM) in its fourth-quarter 2021 investor letter. Here’s what the firm said:

“Our top 10 holdings represented 25.6% of the Fund’s net assets at the end of the fourth quarter. This is in line with historical weightings. Cash at the end of the quarter was 3.4%, which is in line with our low to mid-singledigit targeted levels. We exited our position in Hydrofarm Holdings Group, Inc. as we felt the macro headwinds the company was facing in its end-markets were both challenging and worsening.

1. The Scotts Miracle-Gro Company (NYSE:SMG)

Number of Hedge Fund Holders: 27

The Scotts Miracle-Gro Company (NYSE:SMG) manufactures, markets, and sells products for lawn, garden car, and indoor and hydroponic gardening. It is based in Marysville, Ohio.

On May 1, analysts at Stifel upgraded The Scotts Miracle-Gro Company (NYSE:SMG) from Hold to Buy.

Shares of The Scotts Miracle-Gro Company (NYSE:SMG) were trading at $68.87 on May 1. The average price target placed on the stock by analysts is $79.57, giving it an upside potential of 15.5%. Analysts see the stock as a Moderate Buy since it has two Buy ratings and five Hold ratings.

Out of the 943 hedge funds tracked by Insider Monkey in the fourth quarter, 27 hedge funds were long The Scotts Miracle-Gro Company (NYSE:SMG). Their total stake value was $153.7 million.

Madison Funds, managed by Madison Investment Management, mentioned The Scotts Miracle-Gro Company (NYSE:SMG) in its fourth-quarter 2022 investor letter. Here’s what the firm said:

“Stock selection was the poorest for us in this sector. Two stocks in particular – Hain Celestial (HAIN) and The Scotts Miracle-Gro Company (NYSE:SMG) – while big winners for us in 2020 and 2021, hurt the portfolio in 2022.

While both companies were so-called COVID beneficiaries (businesses that benefited from consumers staying home and spending on their homes during COVID), we felt they possessed certain additional drivers that would maintain their fundamentals into 2022 and beyond.

Scott’s Miracle-Gro is arguably one of the great American franchises. The brand is synonymous with lawn care and pest control, has a dominant market share (~60%) with historically-impressive ~30% cash flow margins, and has the country’s largest Cannabis supply business. Scotts’ core business saw a significant windfall during COVID lockdowns. Lawn and garden care is not a growth business, and SMG dominance does not allow for much incremental gain in market share. However, our thesis was that even in a reopening scenario where lawn and garden businesses would revert to the mean, the cannabis market was poised for years of growth as more states legalized recreational use.

What we missed was the highly inefficient structure of the U.S. cannabis market. Currently, California, Colorado, and Michigan have the biggest and most mature markets. However, over the course of the last few years, several very large states and regions have voted to legalize recreational use, including New York, New Jersey, and Connecticut. The fly in the ointment has been Oklahoma, which is a medical marijuana state. Although recreational use is still prohibited, licenses to grow the crop were granted in Laissez Faire fashion to anyone willing to buy one. Oklahoma began to grow and cultivate the crop far in excess of their medical marijuana demand. That excess supply bled into grey markets across the country, devastating pricing for growers in other states. This glut put a near complete stop to capital spending on grow operations. With no new or incremental facilities coming on, Scotts’ Hawthorne business was cut in half from its peak in F21. This, of course, had a devastating effect on the stock.”

See also Agriculture Stocks List: 25 Biggest Companies and 12 Most Advanced Countries in Agriculture Technology.

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Disclosure: None. 10 Best Vertical Farming and Hydroponic Stocks to Buy is originally published on Insider Monkey.