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Shares of seed and agricultural products company Monsanto Company (NYS: MON) plunged from $92 to $79 yesterday when the company lowered guidance. Monsanto has long been a favorite play on the growing demand for food. It's high-tech, genetically manipulated seeds can produce higher crop yields. No doubt, the food future looks bleak and that's good for Monsanto. But how long will investors have to wait before demand hockey sticks for these seeds and Monsanto can make higher prices stick?Any time a Blue Chip that is a key player in a very popular investment thesis, like the global food trade, takes a big plunge in a secular bull market, it's been an easy time to pull the buy trigger. And that already appears to be the market view, as Monsanto shares began to rebound first thing on May 29, regaining roughly $2 worth of its share loss almost immediately.
Monsanto has an extremely strong product line up. While environmentalists and anti-GMO groups rail against its practices (terminator genes, strict enforcement of IP -- things that are, to many, morally repugnant), farmers generally love the seeds and are using them in increasing numbers for the simple reason that these advanced seeds significantly reduce costs in what is already an extremely low margin business.
The upshot? It's hard to pass up a big dip like this and might be good opportunity, even with the ongoing rebound, to get back into the stock before it regains past levels. The basic story behind Monsanto remains intact, even if the next few quarters remain bleak.
Alex Salkever is Director of Piqqem.com, a stock research community powered by the Wisdom of Crowds.
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