3 Surprising US Megatrends (And 3 Great Stocks to Profit From Them)

It’s easy to forget that innovation isn’t just about profits for shareholders; it’s also about making the world a better place and getting rewarded in the process. For example, the incredible increases in corn yields over the past few decades have helped secure our food supply, the growth of our fuel economy has helped protect the environment, and increased U.S. oil and gas production has helped us harness our natural resources and ensure our energy security.

Dear (Germany -0.94%)Tesla (TSLA -2.33%)Baker Hughes (BKR -0.88%) These three companies have contributed to these success stories, which is why they are attractive to long-term investors.

1. Deer and agricultural productivity

According to the United States Department of Agriculture (USDA) and the Food and Agriculture Organization of the United Nations (FAO), the U.S. corn harvest grew 34% from 2002 to 2022. This figure contrasts with the decline in the European Union’s corn harvest. This is a remarkable achievement considering that the U.S. produces nearly one-third of the world’s corn, and is closely matched only by China (24%) and Brazil (10%) in production.

Data sources: USDA, FAO. Tables by authors.

While the source of the productivity gains is up for debate, there is no doubt that Deere’s equipment and precision agriculture solutions are contributing to them. While the company’s near-term end-market conditions remain challenging due to declining prices for key crops (corn, wheat, soybeans), the long-term outlook remains bright.

Additionally, other major corn-producing countries want to catch up with U.S. yield levels, which will require them to invest in internet-enabled precision agriculture solutions that control spraying and fertilization and help plan planting and harvesting. Deere’s precision agriculture solutions are built into the hardware, giving the company’s equipment and software solutions long-term growth opportunities.

2. Tesla and fuel economy

Elon Musk doesn’t always get the recognition he deserves, but he has almost singlehandedly transformed American cars from a reputation of second-rate gas-guzzlers to leaders in efficiency and quality.

Tesla continues to control the U.S. electric vehicle (EV) market with 50.8% of sales 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 one-third of all EV sales. The company established itself by producing high-quality, fuel-efficient EVs.

According to the U.S. Department of Energy, here is a short list of the most fuel-efficient midsize cars on the U.S. market: While Hyundai and Toyota’s midsize models are comparable in terms of efficiency, Hyundai as a car company accounts for just under 5% of the U.S. EV market, while Toyota accounts for less than 2%.

Data source: US Department of Energy. Table by authors.

There’s no doubt that Tesla has first-mover advantage in EVs, and Musk intends to maintain it by lowering unit production costs and delivering the volume increases needed to make EVs affordable.

While much of the excitement around Tesla is based on the potential of robotaxis and self-driving cars, the company’s growth is built on its current electric vehicle models.

3. Baker Hughes and U.S. Oil Production

The growth in U.S. oil production since 2016 has been nothing short of phenomenal, and the United States now leads the world in oil production by a wide margin.

US Oil Production Data by YCharts

That’s because hydraulic fracturing, improved drilling techniques and better resource utilization have made the Permian region, which straddles Texas and New Mexico, more productive. Oil and gas service companies like Baker Hughes are a big part of that. And if the export capacity expansion is approved, it would improve the outlook for Baker Hughes’ liquefied natural gas (LNG) solutions.

The company’s mid-term expansion into oilfield and gas technology services will complement the rapid growth in LNG and new energy technology solutions and contribute to ensuring the energy security needs of the United States.