Minyanville.com: Why Monsanto Is a Buy


Thanks to the Justice Department and investigation on the Monsanto Company (NYSE:MON) it could provide the perfect entry point for the stock.  Monsanto shares closed today flat at $72.08 with a 52-week range of $66 to $93.

(Minyanville.com) Monsanto (MON), founded in 1901, has come quite a ways since its first sale: a 50-gallon drum of saccharine to Coca-Cola (KO). The company develops bioengineered seeds using patented genes which produce crops resistant to pests, drought, and herbicides.

Chart for Monsanto Co. (MON)However, these benefits come at considerable cost -- corn seed prices have risen 135% since 2001 and soybean seed prices have gone up 108%, compared with a commensurate rise in the Consumer Price Index of 20%.

The New York Times says “farmers have been willing to pay a premium price” for Monsanto seeds because they “[simplify] weed control and [save] labor, fuel and machinery costs.” They also don’t require as much chemical spraying as non-modified seeds, an additional cost savings.

Overall, the seed industry has undergone massive consolidation -- DuPont (DD), Syngenta (SYT), and Dow Agrosciences, a division of Dow Chemical (DOW), have all absorbed smaller outfits -- but, as the undisputed market leader, Monsanto naturally invites the most focus. The company is in the midst of an antitrust investigation by the Justice Department, which is attempting to determine whether or not the company is using its patents on genes to exclude competitors from the marketplace.

Shawn Hackett, president of Hackett Financial Advisors, a money-management firm with a focus on the agricultural sector, says that, while Monsanto may have a “heavy hand,” when a company dominates a market, “people tend to go after you, whether it’s Philip Morris (MO) or Microsoft (MSFT).”

Hackett doesn’t think the DOJ’s investigation will have much effect on Monsanto’s financial outlook.

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SOURCE: http://www.minyanville.com/businessmarkets/articles/monsanto-coke-dupont-dow-syngenta-microsoft/3/15/2010/id/27292

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