Monsanto Company (NYSE: MON) is another one of those demonstrated business companies that was treated rudely by Wall Street in 2008. Pushed to highs over $130 during the commodities mania of 2008, the Street then proceeded to take shares to the mid-$60s. Rational? Hardly.Hopefully, rationality will re-assert itself in the years ahead. In general, analysts see 6-9% revenue growth for FY2009, led by stable corn and soybean seeds sales.
Further, modest pricing power has returned, particularly for higher-value-added, next-generation seeds. Moreover, there is ample room to expand international sales, as emerging markets continuing to develop their agriculture sectors and seek higher per acre yields. The First Call FY2009/FY2010 EPS estimates for MON are $4.40 to $4.88.
The risks include a delay in the U.S./global economic recoveries, which would hurt both seed and fertilizer prices, and prolonged, adverse weather conditions.
Stock Analysis: Monsanto is a moderate-risk stock. Consider buying a 25% position in MON now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your MON position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $41.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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