Charles Schwab just highlighted what may be the next breakout stock of the agricultural sector. Of course, the famed investor and founder of The Charles Schwab Corporation (NYSE:SCHW) isn’t known for staking bets on penny stocks. Recently, however, Schwab made a significant investment in Local Bounti (NYSE:LOCL) stock.
Schwab now has an over 10% stake in Local Bounti, which specializes in growing and distributing farm-fresh produce. Now, LOCL stock is soaring. Specifically, social media has been buzzing since investing influencer Will Meade highlighted the purchase, describing the company as operating in a “hot sector.”
Is that the only reason why a Wall Street icon has taken a significant interest in this previously unknown pick? Let’s take a closer look at Local Bounti and why LOCL stock should matter to investors.
What’s Happening With LOCL Stock?
As of this writing, Local Bounti is up 17% for the day. Of course, LOCL stock is down almost 60% for the past six months, but it has also gained more than 40% in the past one month.
Schwab’s latest purchase of LOCL consists of 3 million shares and has brought the company into focus. However, his motives for such a large investment are more important than the size itself.
This has been an excellent season for companies in the agriculture space. In September 2022, President Joe Biden’s administration announced a historic investment into the sector to the tune of $2.8 billion. This policy — focused on funding smart-farming projects as part of the Partnerships for Climate-Smart Commodities — served to boost companies with ties to agriculture.
Since then, Wall Street has been focusing on larger agriculture stocks like Archer-Daniels-Midland (NYSE:ADM) and Deere and Company (NYSE:DE). But Schwab clearly recognizes Local Bounti as an undervalued play on the booming sector. Schwab bought shares of LOCL stock at the $2.50 mark. Now, shares trade at more than $3 and look set to rise further in the coming weeks.
The White House sees smart farming as the future of agriculture, as is evident by the recent investment. But for investors, LOCL stock may be one of the best ways to gain exposure to the trend. The company claims to use “90% less water and 90% less land than traditional agriculture.” Its products are also non-GMO and free of pesticide and herbicide products. If Local Bounti is able to scale operations and continue growing, it could become the face of the smart-farming movement.
The Future of Farming
Agriculture is indeed a hot sector — and only getting hotter. But Schwab’s investment should signal something important to investors; the future of the industry lies in alternative farming. Smart farming is transforming the way America grows its produce and, as labor shortages and supply-chain constraints continue to plague traditional farming, demand for companies like Local Bounti should only grow.
Of course, vertical farming stocks like Hydrofarm (NASDAQ:HYFM) and Village Farms (NASDAQ:VFF) have performed well since the White House investment. But LOCL stock still trades at lower levels, making it a tempting play. More investors are likely to follow Schwab and bet on Local Bounti’s future.
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On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.