Monsanto Company (MON)

l/t gem.

Mad Money - Cramer Pick

+ World Population
= Land space to grow food
------------
We need better yield on the crops, this will be a fueled by better (genetically-tuned) seeds and fertilizers.

wide moat in agricultural industry, which will do well long term

Great Stock can not be on side lines for long

I like the strength of this company's R&D, which will help them maintain their market position due to their large scale. The company has recently been hit due to declines in their sales of Roundup and some share gains by Dupont. Although Roundup will continue to weigh on results due to its patent loss, this has been a relatively minimal part of the company's value in my opinion as its growth and continued competitive advantages come from its seed sales. Although the company missed its goal of gaining market share for the year I believe the company is still well positioned to continue to gain share due to some new product launches on the horizon and beyond.

Risk from owning the company come from the possibility of consumer backlash of the company's roducts and a potential for further government regulation. Although not insignificant the company benefits from the indirect nature of consumer purchasing. Their direct customers, the farmers, gain immediate financial benefit from purchasing the company's products due to increasing yield and revenue. The consumer however gains an uncertain benefit, as the effects of consumption of genetically modified food are uncertain over time(in my opinion there is the potential for both positives and negatives, leading to a potential future spike or dive). The price difference between modified and non-modified products will increase over time as increased R&D in modified products will further increase the productivity of each acre and consumers will need to pay more and more of a premium. It is very possible that even if there are mild negative consequences from the use of these products that due to an increased world population the use of these traits will be required to maintain present food outputs. As far as potential positives in the future I believe future R&D may move the company more toward improving the overall nutritional value of products. This is more speculative than the other reasoning for purchase of the company but none-the-less could lead to further growth after the market is "saturated."(Most people who consider genetic modification negative focus on how the products are "unnatural." Another "unnatural" product which is consumed is medicines)

A lot of bad press recently has driven the stock price down. The company is still good and makes important products. Long-term buy on a dip and hold.

Monsanto occupies a key spot in food production and will benefit as commodity prices inflate over the coming years. Consistently earns a high ROI and profit margin, and consistently raises its dividend. The recent pull-back allows it to be bought for a fair price.

Rising demand for food and hence agricultural products (such as fertilizer) will fuel Monsantos profits.

This company is part of the bedrock of American products that are exported around the world, food. The agricultural industry is the sole production based industry that American still clearly dominates. As long as we keep growing food, we'll keep needing seeds (and to a lesser extent fertilizer). Target is $115 in a year.

The world needs to eat.

There's so much to like about MON: >20% top-line growth, high margins, growing demand for their products (see 19Oct09 blog post) and a depressed stock price. As long as they can get their expenses down like DuPont did this quarter and nail their product launches next year this will be a big winner.

Once the effect of the current down market have been overcome somewhat, food safety will come strongly back into focus again. The recent decision of the Gates Foundation to direct a large portion of their funds to secure food for the developing world is another strong case in point supporting Monsanto's business.

AG has sat out this commodity rally. Monsanto is really a global warming play, developing seeds that can grow in deserts and swamps. They are developing their clientale base by going to 2nd and 3rd world countries, selling starter kits. Each kit includes: genetically modified seeds, herbicide, fertilizer, and picture instructions for the illiterate. All this comes in a small, portable cardboard box. If you think genetically modified foods are a monstrousity, you probably should compare it to the alternative, which is FAMINE and STARVATION.

Recent short-term bad news has hurt this stock, but long-term this company will be needed to maintain adequate world food production, so the recent stock retreat is a potential buying opportunity.

increasing revenue year over year=excellent.consitant quarterly dividend payments for a long time=sign of strength

Upthumb. Good cash flow. Good payout. 17% 5 year sales growth. Low debt. High margins.

Very good business model with strong vendor lock-in. Adaptive to high inflation.

See my comments on Potash (POT).