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After growing up in abject poverty and at times homeless, I taught myself the basics of economics and finances in the business department of the San Francisco Public Library. I have worked for firms such as Bear Stearns, The Federal Reserve Bank of San Francisco, and as a subcontractor to Fannie... More
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  • Monsanto (MON) within striking distance 2 comments
    Nov 3, 2009 10:18 AM | about stocks: MON
    According to Google Finance, "Monsanto Company along with its subsidiaries, is a worldwide provider of agricultural products for farmers. The Company’s seeds, biotechnology trait products, and herbicides provide farmers with solutions to produce foods for consumers and feed for animals. The Company operates in two segments: Seeds and Genomics, and Agricultural Productivity."

    Although Monsanto (MON) isn't a Dividend Achiever or a member of the Nasdaq 100, the company has a solid history and provides investors with an exceptional opportunity.

    MON is currently trading within 5.85% of the the 52-week low. What is significant about the low that MON is approaching is that it is close to the November 2008 low. This is a critical support level for the stock which could indicate that a major reversal is ahead.

    According to Dow Theory, MON is projected to decline to the following levels:
    • $52.17
    • $37.08
    • $21.99
    • $6.90
    Each of the downside targets, based on Dow Theory, should provide some kind of support level. Interestingly, MON's 50% level, based on the decline from the prior peak and the July 2002 low, is at $67.90. This means that either the stock declines much further or the stock rebounds from here.

    According to Value Investment Survey dated August 2009, MON typically reverts to a level of 17 times cashflow. Full year 2008 cash flow was $4.50 per share. This equals a price of $76.50 that the shares should revert to at some point in the future. Value Line seems to believe that, for 2009, MON should achieve cash flow of $5.55 per share which implies a mean price of $94.35. I would opt for the lower price just to play it safe. In the period from 1981 to 1996, Value Line had a smaller mean price to cash flow (13x). This means that as time has gone on since 81' to 96' MON has managed to improve their price to cash flow figures.

    With MON trading at 11% below the historical mean value, as well as being within 6% of the low, this is a good opportunity to get your research in as the share price declines. Focus on the downside risk and good luck.

    Disclosure: No positions
    Stocks: MON
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This post has 2 comments:

  •  
    Relative Strenght Index is also around 20, a verY Good entrY point, sorrY can you explain me how you came up with the 4 levels mentioned above, is it some kind of fibonacci? But fibonacci retraces highs with actual lows, not past lows with past highs......
    Nov 04 10:05 AM | Link | Reply
  •  
    Don´t you think that going back 7 years, to your low, is a bit too much, but all the other points you made are good, I believe November lows are Strong Support levels, but should it go under I don´ t think your levels will be useful, opticallY on the Chart 40 $ and 60 $ look like possible support levels, 2006 and 2007 Mon traded around these levels for months......, I think traders will look for fibonacci retracements from the High(140$) to the actual supposed low around 68$ and may use them to set resistance levels, there are no resistance lines until 80$, so it could easily go to 80$ and the first fibonacci retracment 23%(possible resistance) is just around 80$, so everything looks good and Soft commodities prices are up a lot too
    Nov 04 10:28 AM | Link | Reply
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