Monsanto's (NYSE: MON) stock has not cooperated since the June 15, 2009 Buy recommendation, as the shares have drifted about 10% lower. Still, nothing has changed regarding MON's value proposition, hence I'm Reiterating my June 15, 2009 Buy recommendation, when shares were at $84.97. Higher-value-added, next-generation seeds will see substantial demand increases as the economic recovery progresses. Moreover, there is ample room to expand international sales, as emerging markets continue to develop their agriculture sectors and seek higher per acre yields.
True, fertilizer prices slipped as the end of the northern hemisphere growing season approached, and this perhaps explains at least some of MON's recent 10% stock price dip.
Even so, from a technical standpoint, the stock price decline will represent a triple-bottom, provided MON holds support in the $69-$72 range. A sustained drop below $68 would be bearish. Hence, the Sell/Stop Loss has been revised to $62 from the earlier $41.
The First Call FY2009/FY2010 EPS estimates for MON are $4.41 to $3.43.
Stock Analysis: Monsanto is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, 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 December 2009. Revised Sell/Stop Loss if you bought shares in this company: $62.
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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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