Monsanto Considered An Ideal Vehicle For Green Investing

In the late 1990s, genetically modified food was vilified as "Frankenfood" in many global-reaching protests and boycotts. Today, one of the key targets of this wrath, Monsanto Co. (MON), is riding a wave of popularity with investors as the stock hits a series of record highs. This winning streak should continue, which bodes well for the entire agriculture sector.

Monsanto, which released its fiscal fourth-quarter and year-end results Wednesday morning before the market open, may still make organic consumers cringe, but its seed and crop protection products tap into a far more important trend.

Since the company is a giant agriculture biotech firm that develops products to boost farm productivity and decrease the need for water, energy, pesticides and insecticides, it is seen by many investors as an ideal vehicle for green investing. Early this year, Citigroup included the stock in its list of climate change "top picks."

Just as important, Monsanto has been reporting strong earnings growth, often blowing past expectations by a wide margin. Last quarter, its revenues were 23% higher than the corresponding quarter in the previous year and net earnings were 71% higher.

Part of this most recent growth has been due to the strong demand for corn seed in the United States as the country ramps up its ethanol output. But corn represents just one firing cylinder for the company. Some of the others include the growing prosperity in emerging markets, rising food prices, an investor infatuation with agriculture firms and a broad platform of products that spans soy, cotton, canola and fruits and vegetables -- many of which will see big research and development pay-offs in 2009 and beyond.

"This platform, in our view, is well positioned to deliver sustainable high-teens earnings growth into the next decade even coming off outsized gains in 2007 due to near-record U.S. corn plantings," said Laurence Alexander, an analyst at Jefferies & Company.

No wonder investors have been rewarded with a stock that has risen 70% this year alone and more than 1,000% over the past five years. It closed Tuesday in New York at US$89.52, up US$1.75 for a new record high.

A dip in the stock price is the best thing for new investors to hope for.

MON 1-yr chart:

Comments

[Tom B]

The ethanol speculation is obviously temporary. Once somebody explains to Dumbo Bush that you burn more energy than you produce converting corn to ethanol, that market collapses. A bubble for the very stupid. As for GM food: I wouldn't call it "green" and I think the only reason THAT market persists is the lack of a requirement for a warning label on GM produce. There's really high liability risk associated with this stock, and that's not a good thing.

2007 Oct 15 08:57 AM

[Phiz]

With the increasing risk and the high P/E, should investor's like me be buying puts? I read an article a few days ago that suggested so. www.richerthanyourdad..../

2007 Oct 19 12:07 PM

[Phiz]

With the increasing risk and the high P/E, should investor's like me be buying puts? I read an article a few days ago that suggested so. www.richerthanyourdad..../

2007 Oct 19 12:07 PM