Monsanto Update

Monsanto (NYSE: MON): We originally recommended on April 30/07 at $60.30. Closed Thursday at $90.03 (all prices in U.S. dollars).

Last month the company announced second-quarter earnings of $1.09 billion ($1.97 per share), down slightly from $1.13 billion ($2.02 per share) last year. However, excluding one-time items, earnings per share for on-going business were $2.16, up from $1.77 last year. Pretty good numbers in a tough economy!

I originally recommended this stock in April 2007 at $60.30 and last mentioned it as part of an agricultural basket in September 2008 when it was trading at $118.41. The stock is currently trading in the $90 range and I expect it to break $100 before this run is over. The 52-week high was $145.80, which was reached last June, and I believe we could go there again. I just bought some more for one of my accounts and I consider it a key holding for the next 12 months.

The stock held up very well through the meltdown and the agricultural production story is still intact. Food consumption is only down 3% but the stock has been punished along with all the other fertilizer stocks like Potash Corp. (POT). All these stocks have begun to rebound and I think it's a sure bet that they will continue to do so.

Action now: Buy with a price target of $120.

Comments

[StockBoy:]

I agree. I have heard nothing changing the outlook for world demand. I predict that not only will POT, MOS, IPI, etc. increase in value, but also DE, CAT, and CNH will increase sales as the plight farmers improves.

May 15 02:43 PM

[azeotropic:]

Corn ethanol is history and so is that part of the seed market and Monsanto's push for food-crop biofuels. This is good news for those concerned with the ever-growing deadzone in the Gulf of Mexico. Monsanto's growth will be significantly impacted by this market loss.

May 15 02:48 PM

[naidle:]

There's no such thing as a sure bet.

May 16 01:03 PM

[Globel E:]

A reassuring review of prior notions. Keep in mind that while Monsanto can be associated with the "other fertilizer stocks", it is far more. They have been working for 20+ years on the development of super seeds- not simply pest resistant, but actually resistant to the pesticides that sometimes damage crops. Add a talent for producing fixed N internal to the plant and it is difficult to see how they cannot succeed in dominating the seed market. To my knowledge only DuPont and Bayer are currently following in their custom seed development universe. Surely, there must be others, but none are anywhere near the commercial promise of Monsanto!

May 16 04:21 PM

[ScroogeMcduck:]

Even though ethenol doesnt make sense. As long as the dems are in power its not going anywhere

May 26 04:52 PM