Improving farming productivity, fuel-efficient vehicles, and ramping up oil production are three great success stories of the U.S. economy.
It’s sometimes easy to forget that innovation isn’t just about making shareholders money; it’s also about making the world a better place and being rewarded for it in the process. For example, the incredible increase in corn yields over the last few decades helps ensure food supply, growth in the fuel economy helps preserve the environment, and growth in oil and gas production in the U.S. helps utilize natural resources and provide energy security.
Deere (DE -0.94%), Tesla (TSLA -2.33%), and Baker Hughes (BKR -0.88%) are three companies contributing to these success stories, and that’s what makes them attractive to long-term investors.
1. Deere and farming productivity
According to the United States Department of Agriculture (USDA) and the United Nations Food and Agriculture Organization (FAO), corn yields in the U.S. improved by 34% from 2002-2022. This number stands in marked contrast to the decline in European Union corn yields. This is a remarkable performance, considering the U.S. produces almost a third of global corn, with only China (24%) and Brazil (10%) anywhere near it in terms of production.
| Country |
2022 Corn Yield (Tonnes Per Hectare) |
Increase Over 20 Years |
|---|---|---|
|
U.S. |
10.88 |
34% |
|
China |
6.44 |
32% |
|
Russia |
6 |
119% |
|
Ukraine |
6.35 |
80% |
|
E.U. |
5.99 |
-8% |
|
Brazil |
5.2 |
70% |
Data source: USDA, FAO. Table by author.
While the causes of the productivity increase are subject to debate, Deere’s equipment and precision agriculture solutions will undoubtedly contribute to it. While the company’s near-term end-market conditions remain challenging due to declining key crop prices (corn, wheat, and soybeans), the long-term outlook remains positive.
Moreover, other major corn-producing countries want to catch up with U.S. yield levels. In that case, they will likely need to invest in precision internet-enabled agriculture solutions that can control spraying and fertilizing and help plan planting and harvesting. Deere’s precision ag solutions are embedded in its hardware, giving it a long-term growth opportunity for its equipment and software solutions.
2. Tesla and fuel economy
Elon Musk doesn’t always get the credit he deserves. However, he’s almost single-handedly changed the reputation of U.S. autos from being gas-guzzling also-rans to becoming the leaders in efficiency and quality.
Tesla continues to command 50.8% of the U.S. electric vehicle (EV) market by volume, with its closest competitor, Ford Motor Company, a distant second at 7.4%. Tesla dominates the U.S. EV market, with its Model Y alone accounting for a third of total U.S. E.V. sales. The company got there by producing high-quality, fuel-efficient EVs.
According to the U.S. Department of Energy, here’s a short list of the most fuel-efficient midsize vehicles in the U.S. market. While the Hyundai and Toyota midsize models are comparable in terms of efficiency, Hyundai, as a car company, has slightly less than 5% of the U.S. EV market, and Toyota has less than 2%.
|
Maker |
Model (Midsize Cars) |
Type |
Combined City/Highway (Miles Per Gallon of Gasoline-Equivalent) |
|---|---|---|---|
|
Hyundai |
Ioniq 6 Long-Range RWSD (18-inch wheels) |
EV |
140 |
|
Tesla |
Model 3 RWD |
EV |
132 |
|
Toyota |
Prius Prime S.E. |
Plug-in Hybrid EV |
127 |
|
Mercedes Benz |
EQE 4matic |
EV |
96 |
|
Audi |
e-tron G.T. |
EV |
85 |
Data source: U.S. Department of Energy. Table by author.
There’s no doubt Tesla has the early-mover advantage in EVs, and Musk intends to keep it that way by generating the volume growth necessary to lower unit cost production and make EVs affordable.
While much of the excitement around Tesla is built on the potential for robotaxis and autonomous driving cars, the foundations of its growth are laid on its current EV models.
Image source: Getty Images.
3. Baker Hughes and U.S. oil production
The growth in U.S. oil production since 2016 has been little short of remarkable, and the U.S. is now the global leader in oil production by some margin.
U.S. Oil Production data by YCharts
It comes down to increased productivity in the Permian region spanning Texas and New Mexico, driven by fracking, improved drilling techniques, and better resource utilization. An oil and gas services company like Baker Hughes is a big part of that. In addition,Baker Hughes’ liquified natural gas (LNG) solutions prospects will also receive a boost should more export capacity get approved.
A medium-term boost to the company’s oilfield and gas technology services will complement its burgeoning growth in LNG and new energy technology solutions while helping the U.S. ensure energy security needs.
Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Deere & Company and Tesla. The Motley Fool has a disclosure policy.