If you are an investor that has an appetite for a bit of risk that could lead to massive gains in the future, you are probably the type to get into sectors before they are on anyone else’s radar. A few years ago it was electric vehicles, renewable energies, and cannabis that were the hottest sectors to get into early. Today, cloud computing and artificial intelligence are popular, but perhaps the most divisive sector that is gaining popularity is genomics. The science of genomics delves into the mapping and analyses of our genetic makeup, and is believed to be the key to curing diseases and genetic mutations in the future.
Genus PLC (LSE:GNS) is a U.K. based enterprise that is in the business of animal genetics. What is the reason for analyzing animal genetics? Genus PLC works alongside farmers by breeding pigs and cattle that produce high quality milk and meat. Yes, these are genetically modified animals, which is sure to be a controversial topic, but the end game of Genus PLC is to create healthier food options that are disease resistant, as well as having proportional levels of protein and fat. It is an interesting industry to look towards for investing, so let’s see how Genus PLC can do in the long run.
The Bullish Case: Pardon the pun, but the bullish case for Genus PLC is to solve a global secular trend of food shortages while helping farmers remain sustainable and profitable. With healthier pigs and cattle, farmers and breeders no longer have to put down disease-ridden animals, which is a waste of money, time, and most of all life. Is it playing God? Not necessarily, as it is more of a form of controlled breeding using the animals with the healthiest and strongest DNA samples. Its digital platform IntelliGen Technologies screens and processes semen samples for traits that are desirable in future generations of cattle. Genus also undergoes gene editing on pigs to ensure disease resistance that can cost the farming industry billions of dollars per year. Not only will this ultimately help to sustain the global farming industry, but Genus is working on creating healthier beef and pork at a time where the middle class, traditionally the largest red meat eating group, is rapidly growing around the world.
The Bearish Case: Of course the bearish case for gene editing in animals is fear of animal cruelty, inbreeding, and an inherited God complex. Even though the ultimate goal of Genus is to help cows and pigs destined for human consumption live healthier lives, the idea of genetically modifying animals still may not sit well with the general public. The true long-term effects of genetically modified livestock still aren’t known, and that goes for the humans who ingest the meat as well. It’s not a cheap stock either, as the current valuation sees it trading at 68 times trailing price to earnings.
Final Verdict on Genus PLC: The stock is an interesting play on how our food system will look like in the future. Animal genetics seems like a harmless and efficient way to create healthier livestock, as well as reduce unnecessary animal death which costs the global farming industry billions of dollars every year. Genus PLC even pays a small dividend with a 0.59% yield, which is a nice added bonus for long-term investors. This seems more like a watchlist stock than an immediate buy, especially at its current valuation, but synthetic foods and gene editing will definitely be sectors to watch moving forward.