Meat. Animals. Suffering.
Has anyone been watching the “Alone” TV series where intrepid contestants battle starvation in Canada. Have you noticed every contestant goes to great lengths to say thank you to the animal(s) they killed? I’m glued to the screen waiting for a gratitude faux pas. It never happens but one day reader, one day. I track the hunters and will snare them as soon as they commit the (apparent) cardinal sin and forget to voice their thanks. If you aren’t an Alone contestant maybe you don’t say thanks as often and they do, reader, to the animals who went into those supermarket packets to fill your tum.
Have I turned an investment column into an animal rights activism column? Like ‘eck. I’m no fan of animal pain and suffering, but I eat meat from supermarket packets and don’t hunt grouse, squirrels or catch my meat with my own thankful hands. Great admiration for those that do - respect. I expect reader you are no different.
But whilst there’s a latent guilt to eating our packaged meats there’s also a truism. Growing and slaughtering animal is very, very inefficient. It requires lots of energy, lots of (animal) feed, lots of time, it’s prone to risk, disease and requires a lot of space. Lots of government subsidies (especially in France). It generates a lot of pollution. 26% of all CO2, reader. I believe we need to get to 15Bn tonnes by 2050 so food is 1/3 of that net zero goal.
Yeah, yeah, first animal rights, now net zero, what’s the investment I hear you cry. Stop preaching and start giving us the good stuff. Tell me about the deep value, the forecast profits.
Well reader, I hope I don’t disappoint.
ANIC: Agronomics, Market Cap £93.4m, Bid 9.3p Ask 9.6p, NAV 16.48p (30/09/23), discount to NAV 41.7%, 993.15m shares
Net Assets at H1 2023 were £164 million, including investments of £140 million and uninvested cash and short-term deposits of £24 million. Stripping out cash it’s on a 57% discount to underlying NAV of investments! A £3m buy back is already underway.
Tasty.
ANIC has 22 Investments in Chicken, Leather, Dairy, Designer Proteins, Blue Fin Tuna, Pork, Beef x 2, Egg x 2, Cotton, Gene Edited Crops, Chocolate, Fermentation Manufacturing, Seafood, Pet Food x 2, Palm Oil and Wild Microbes (to make anything from chemicals to cosmetics)
These food products are being grown without a single living, breathing animal being harmed. Remember Dolly the Sheep? This is Dolly the Wagyu Steak.
Typically these are serious $50m-$150m companies dotted around the world with a 3%-10% ANIC stake although there are some Seedlings too.
Cultivated Meat. Not vegan/vegetarian or imitation meat. No Linda McCartney, this has blood dripping from it, not beetroot juice (I’m a big fan Linda McCartney Mozzarrella Budgers Readers - so I’m not saying those products aren’t good - but Cultivated Meat is not Soy or Pea Protein. It’s animal protein and this is how it’s made.
Some products in the ANIC portfolio are described as Vegan, however. I guess because no animals were harmed, so the PC mob are happy tear free bunnies too.
You might dismiss this as hocus pocus or Franken-Foods but some holdings have some serious backing.
This FTSE250 company, for example part owns Meatly. Coming soon to a store near you. Pet food made with no pain.
Jim Mellon is the CEO of Agronomics and is a highly successful UK business leader. It’s well worth listening to his interview.
Jim wrote Moo’s Law and you can read a sample of that book here.
Anthony Chow is the co manager. He is interviewed here:
What is impressive, too, is the growth in NAV of ANIC even during the recent…. “difficult period” (nice euphemism there reader). The grey line is the NAV.
If you examine the individual holdings their internal rate of return (IRR) vary from 40% to over 200%.
What will send this higher?
Continued funding rounds and positive news
Valuation reversion to historical
Buy backs
M&A
FDA approvals - expected 2024. First step for approval a “no questions” letter was received Upside’s Chicken Product earlier this year.
Leather - fashion is fickle but real leather that’s guilt free, one can imagine Stella McCartney, Anna Hindmarsh and all the glitterati embracing Cultivated Leather. You can drag your “real” Fur Coats without any blood stains on the floor.
Fur Babies - pet food safety is less onerous than human so is this a way to start scaling the process of cultivated meat production. Pets at Home are pioneering this through the investment in Meatly.
Blue Fin Tuna. I don’t know about you reader but I find the $3m price tab on a recent large Blue Fin Tuna catch obscene. They are endangered and heading towards being extinct. Sharks are heading the same way. Don’t say good, reader, Jaws is my favourite film. Imagine a world where people can eat their revolting Shark Fin Soup or yummy Bluefin Tuna Steak with no aimals harmed. Beyond the moral dimension it’s good business sense. You don’t run out of stock!!! Blue Fin is £500/kilo if you’re lucky enough to find any. Plenty of profit to be made. According to BlueNalu, the BlueFin Tuna market would be 10X larger if there was sufficient supply.
It was this big
BlueNalu don’t make Shark Fins but they do grow TORO. Toro is a cut from the Blue Fin Tuna and is the creamiest and most marbled piece of the fish so is the most highly prized cut. The Fillet and not the Rump one might say.
The NAV is book value. Anthony Chow speaks to current NAV being “more like 21p a share” by the end of 2023.
This Edison Research Report on ANIC is an interesting source of info
Trends and Extrapolation. As countries have grown wealthier they eat more meat. Just look at how China’s catching up with the West in its meat habits. What about Africa? Where will their meat come from? The UK - where will our meat continue to come from? Do you think recent food inflation has anything to do with resource exhaustion reader? I suspect this to be true (and hope it isn’t). “Sticky inflation” might be a euphemism that we are heading towards the car crash catastrophe the likes of which David Attenborough warns us of. ANIC may be the Knight in Shining Armour - delivering a solution like the Covid Vaccine did a few years past.
Legislation.
However powerful the farming lobby are it’s difficult to argue with something that uses a fraction of everything - if it works. Will we see changes at COP28 next month? I think we all know “something must be done”. Even if the food supply isn’t under mortal threat and the Oak Bloke’s worrying about nowt.
Conclusion:
I think there are strong counter-cyclical reasons to hold ANIC. We all need to eat.
ANIC has a great track record of NAV growth - even if it moved from premium to NAV to discount to NAV.
As I argued yesterday in HOC on the Block - have some investments diversified from the business cycle. If more dreadful events happen in 2024, Food could go in an upwards price spiral. The economics of Cellular Agriculture quickly become more and more compelling.
This is not advice. My advice if you need advice is to get advice.