Fresh off a recent award for innovation in robotics and technology for its automated tractor, John Deere (DE) is set to report its earnings this Wednesday, appropriately the day before tens of millions of Americans feast for Thanksgiving. With signs suggesting the firm may report positive news, investors looking to make a play on the agriculture leader may want to consider an agriculture technology ETF like the ARK Autonomous Technology & Robotics ETF (ARKQ).
As the Earth’s population reaches a new milestone of 8 billion people, the need for efficient farming is greater than ever. That underscores the interest in agriculture technology advancements like those being developed at DE with its automated tractor. Combine John Deere’s role in agtech development with positive earnings reports from peer firms like Caterpillar (CAT) and CNH Industrial (CNHI) and the investment case for DE to join in on the fun grows even further.
Moody’s also recently updated its outlook for John Deere, affirming its A2 rating and changing the overall outlook for the firm to positive. Given the performance of the DOW and its constituent industrials, there may also be an overall upswing for big, non-tech companies with mega-cap tech firms bearing most of the brunt of rate hikes and fears of recession. DE currently shares the top rating in the IBD farm machinery group, for example.
ARKQ invests in firms working on innovations in robotics and autonomous tech, holding DE as its fifth-largest weight at 6.4%. ARKQ has returned 7.5% over one month compared to -25.3% over the last three months according to VettaFi, with a recent uptick in flows: the strategy saw its net flows increase by about $15 million between the one-month and five-day time frames.
Investing actively, ARKQ offers a 0.75% annual dividend yield, which exceeds the FactSet Segment Average yield of 0.18% and tacks closely to the ETF Database Category Average of 0.87%. The strategy charges a 75 basis point fee.
The outlook for farming still looks bright as 2022 draws to an end. With DE perhaps able to resist some of the recessionary headwinds looming in early 2023 via reduced expenses and strong M&A, investors should keep an eye on an agriculture technology ETF like ARKQ as a play for John Deere’s earnings call this week.
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