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postcards from the florida republic: an independent and profitable state of mind.
At a Chicago loop dive bar, a co-worker at an ag startup couldn’t contain his excitement.
His family grew corn and soy “downstate,” and as harvest season was approaching, he couldn’t stop talking about the “new paint” on the farm.
I studied agribusiness, but I didn’t know new paint from old paint. Then again, I was the odd man at the table; my other co-workers had family farms too.
So, if, like me, you didn’t grow up using “choring” as a verb, you’re probably asking the same question: What’s “new paint”?
It’s a term you need to know today. It’s the key to taking in a bumper crop of cash - massive artificial intelligence (Ai) profits for your portfolio.
The AI Stock to Buy, Hold, and Own Forever
Since January, Ai has been the craze. But the valuations of Ai stocks like C3.ai (AI) and NVIDIA (NVDA) make no sense to anyone who’s ever done even basic securities analysis.
How can anyone stand there with a straight face and justify C3.ai’s valuation?
C3.ai trades at 17.3 times sales. A valuation of 17.3 times sales means the company must return every penny of revenue (not profits… but sales) to investors for 17.3 years to justify its valuation. At that level, they theoretically can’t pay their staff… their taxes… or for R&D. Every penny goes to investors.
With NVIDIA, it’s even worse. It trades at 233 times earnings and 41 times sales. That’s 41 years of revenue forked out to investors. Insane, right?
Now – take a name like heavy machinery maker Deere (DE), of John Deere tractor fame. The ag-company trades at just 14 times earnings and two times revenue.
And Deere happens to be the best stock of the three to tap the enormous profit potential of Ai.
Why? New paint, of course.
New Paint, New Technology, Bigger Profits
John Deere’s been around since 1837. For years, the company has marketed under the classic tagline “Nothing runs like a Deere.”
Deere manufactures heavy construction equipment, forest machines, diesel engines, lawn equipment, and drive chains.
But ask my farmer friend in Champaign, Illinois, and he’ll tell you Deere makes the “best damn farm equipment” in the world.
He calls every new piece of machinery that arrives for planting and harvest the “new paint.” Deere owns the lion’s share of farm machinery revenue with tractors, combines, backhoes, and more.
But now “new paint” will have a new trick.
For decades, Deere has quietly emerged as one of the top artificial intelligence companies in the world – and few analysts paid close attention.
None of them realized Deere’s “secret sauce” was automation, advanced analytics, and Ai applications?
The ag – or, more to the point, “ag-tech” giant has been in the high-tech game for decades already. They began heavy investment into robotics and automation back in the 1990s. On November 2, 1999, the company purchased GPS startup NavCon. The goal: to develop satellite-directed guidance systems for tractors.
In 1999, it formed GreenStar, a GPS for precision agriculture that brought positional accuracy down to a question of centimeters. Previous guidance systems were off by meters. GreenStar allowed farmers to accurately map and position key field operations like planting, pesticide spraying, and harvesting.
A lot of the ag-tech advancements that people I know are perfecting at the AgTech Innovation Center at the University of California-Davis today started at Deere’s offices before the Dot-Com bubble.
Deere also established AutoTrac years later. This critical automation advancement allowed farmers to steer their tractors, combines, and more on an automated path.
Plenty of traders I know sit on their machines during harvesting and planting… guided by GPS and Autotrac.
While they’re getting farm work done, they’re also buying calls and puts or trading stocks during the day. (Some might be on dating sites or playing online poker - but they’re not driving).
These advancements have not only helped establish Deere as a force of innovation but it’s boosted their sales and set them apart from rivals.
Deere’s technology will be invaluable to a trend of increasing populations over the next 30 years. By 2050, the world population is likely to explode to 10 billion people, increasing global food demand by 50%.
All this with less land and less available skilled labor to operate farms. That’s why Ai is the new frontier – and the solution to so many challenges hitting farms around the globe.
Deere Advancements in the Ai Arena
John Deere has made significant investments in recent years in machine-learning algorithms. The goal is to optimize its machines' performance and improve decision-making in its tech.
The company has introduced a powerful line of driverless tractors. Its previous Ai-guided systems would allow tractors to manage tight turns and carve straight rows along the farm.
However, they required humans to be in the cab to avoid mud puddles, bypass obstacles, or move to the next task.
Today, these Ai-driven machines can drive to a field and manage tasks like seeding without a farmer's help. This is the definition of "Set it and forget it" farming…
This is a massive development because the job of farmers isn't just seeding, growing, feeding, and harvesting. As another former colleague explains, a farmer's life is very comparable to a hedge fund manager's. The job is part weatherman, financier, supply chain expert, poker player, plant scientist, and more.
The less time they allocate to the fields, the more time they can get to the actual management. And that's where the importance of predictive analytics lies.
Predictive Ai analytics will be a core driver in the future for agriculture and maximize the profitability of farm operations.
The variables within a farm operation are massive. We're talking… soil moisture levels, weather conditions, weed distribution, pest infestation, crop growth patterns, crop selection, root growth and depth, soil fertility, satellite images, crop yield estimates, topography and slope of land, irrigation metrics, and even farm financial reports.
Ai will help farmers make more informed decisions across all these variables. It can help engage in automated harvesting and sorting of crops, identify weed growth, and provide real-time recommendations on when to allocate resources across the farm (including water, fertilizers, pesticides, and more).
Deere's Ai-powered Operations Center and MyOperations offer farmers real-time insight, probability assessments, and custom recommendations to optimize their farms.
This ain't Old Macdonald's farm.
Ai Can Do Much More in Agriculture
Artificial intelligence won’t be limited to the “new paint” machines that operate on the family farm.
We haven’t discussed the ability to monitor livestock in real-time, manage farm animal health, optimize supply chains, calculate inventory levels, and even maximize hedging strategies when selling commodities to buyers across the value chain.
AI is not just about computer chips, ChatGPT, and automated imagery. It’s a deflationary, time-saving phenomenon that will optimize operations and boost profit margins across many industries.
A real company with a rich history of Ai advancements in producing real assets runs through Deere (DE).
While other investors chased unprofitable Ai names that I couldn’t pick out of a lineup, Deere trades at a surprisingly reasonable valuation with decades of dominance ahead.
To your wealth,
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About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.