Monsanto (NYSE: MON) shares are trading higher today after the company announced that it has finished its acquisition of Marmot, SA, which includes the Latina American seed company Semillas Cristiani Burkard. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on MON.
After hitting a one-year low of $58.50 in August, the stock hit a one-year high of $145.80 in June. MON opened this morning at $119.50. So far today the stock has hit a low of $119.28 and a high of $124.09. As of 12:20, MON is trading at $122.94, up $5.40 (4.6%). The chart for MON looks bearish and steady, while S&P gives the stock its highest 5 Stars (out of 5) Strong Buy rating.
For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $95 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.2% return in just five weeks as long as MON is above $95 at August expiration. Monsanto would have to fall by more than 22% before we would start to lose money.
Shares of agricultural producer Monsanto (NYSE: MON) are trading in the red today, despite posting better than expected earnings per share for its fiscal third quarter. The main reason why the stock is trading lower is that it was unable to match the revenues that Wall Street was hoping to see.
Heading into today's earnings release, analysts had been hoping to see Monsanto show earnings of $1.34 per share, and the company was able to come in above this, with a reported $1.45 a share for the quarter. A fairly impressive EPS, and a very respectable 42% jump from the same period last year when it reported earnings of $1.02 a share to its investors.
The company stated that the main reason for the jump in earnings was strong sales for herbicides as well as specialty seeds. One of the company's most recognizable names in the herbicide market is Roundup, which it said had a great quarter.
When natural disasters happen, there are always some companies that can turn the circumstances in their favor. Recent downpours in the Midwest provided such an opportunity as they came not only with high damages for people in the area, but also with floods for crop production, causing even higher agricultural commodity prices. The rise in corn and soybeans prices could easily lead to an increased demand for seeds, agricultural equipment, and fertilizers. BusinessWeeksuggests some big names to invest in that could offer us the advantages we are looking for.
One such company is Archer Daniels Midland (NYSE: ADM), which could also benefit from higher ethanol prices, after purchasing seven businesses in 2007. Bunge Limited (NYSE: BG) is also amid possible winners, having forecast better-than-expected fertilizer earnings. Shell eggs producer Cal-Maine Foods (NASDAQ: CALM) is also on the selected list; the company saw its shares climb 15% year to date, and has just revealed a new dividend payout policy.
Another important name is Mosaic Co. (NYSE: MOS), whose stock prices have surged 70% so far this year. BusinessWeek cites Mosaic as being able to benefit from higher prices for fertilizer and potash. Following the same logic, the article points out potash provider Potash Corp. of Saskatchewan (NYSE: POT) and fertilizer distributor CF Industries Holdings (NYSE: CF), which should be able to take advantage of the weak dollar and higher sales prices.
Goldman Sachs says, "We believe MON offers powerful combination of near-term EPS visibility with medium-longer term pipeline." Goldman has a 12-month price target of $155. MON is expected to report Q3 EPS in late June.
MON July option implied volatility of 47 is below its 26-week average of 53 according to Track Data, suggesting decreasing price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
Farmers are paying more for supplies to grow their crops and they're passing those rising costs onto consumers. The Wall Street Journal reports that farmers paid 65% more for fertilizer in April 2008. Fuel, the second-fastest rising cost, is up 43%. And seed prices have risen 30%. But you can hedge your rising food costs by investing in companies that profit from rising fertilizer prices.
Farmers say too much market power is concentrated in the hands of a small group of companies in the U.S., Canada and Russia that dominate global production of potash and phosphate. Phosphate is up 174% from $365 last year to $1,000 a ton. The price of a ton of potash is up 204% from $230 to $700. Thanks to a rise in natural gas prices, the price of Urea, a nitrogen fertilizer, has doubled to $600 a ton.
Should you hedge your rising food prices by buying stock in Potash and seed suppliers? Potash Corp. (NYSE: POT) and Mosaic Corp. (NYSE: MOS) have benefited from the rising price of Potash. And Monsanto Co. (NYSE: MON) is the biggest seed company out there. They have benefited in the past year -- with stock prices up 202%, 279%, and 103% respectively. But will they keep rising?
Monsanto (NYSE: MON) shares are trading higher after oil and gasoline prices jumped to record levels yet again today. With oil so expensive, alternative bio-fuels are pushing agricultural futures higher as well, which is good for Monsanto. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on MON.
After hitting a one-year low of $58.50 in August, the stock rose to hit its one-year high of $132.36 in April. MON opened this morning at $121.60. So far today the stock has hit a low of $121.23 and a high of $124.91. As of 11:05, MON is trading at $124.34, up 4.44 (3.7%). The chart for MON looks neutral but deteriorating slightly, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a June bull-put credit spread below the $105 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just four weeks as long as MON is above $105 at June expiration. Monsanto would have to fall by more than 15% before we would start to lose money. Learn more about this type of trade here.
MON hasn't been below $105 since March and has shown support around $110 recently. This trade could be risky if the price of oil starts to relax, but even if that happens, this position could be protected by the support the stock might find at its 200-day moving average, which is currently around $102 and rising.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in MON.
TheStreet.com's Jim Cramer says the bull story here has more causes than just a weak greenback.
Better seeds and more fertilizer. That's it. Those are the technology weapons in the war against food shortages caused in the short term by a worldwide obsession with biofuels (we are the worst offender, of course) and in the long term by the increased affluence in China and India, which leads to more nutritious, protein-filled diets.
Both forces, when combined with worldwide droughts and failed harvests, not augmented by the U.S. -- we are late to start with our corn season -- are driving prices up to ridiculous levels. I have no doubt that if tomorrow the president of the United States said he was suspending the biofuel mandates for ethanol that we would see a collapse in food pricing. But I also have no doubt that this inept administration could never figure that out.
So, the solution comes to all of the stocks that were crushed yesterday: Monsanto (NYSE: MON) (Cramer's Take), Potash (NYSE: POT) (Cramer's Take), Mosaic (NYSE: MOS) (Cramer's Take) and Agrium (NYSE: AGU) (Cramer's Take). Without better seeds that produce higher yields, without more fertilizer that increases yields, we are going to be facing a long-term continuation of these price increases and the attendant inflation and food riots. Inflation, by the way, that has nothing to do with the Fed, unless the Fed is also a big granary hoarding wheat and corn.
After seed company Monsanto Co. (NYSE: MON) announced on Wednesday its second-quarter profit more than doubled on higher corn seed and herbicide sales, it was its main competitor Mosaic Co. (NYSE: MOS)'s turn to step up to the plate and impress Wall Street. The world's largest maker of phosphates managed to exceed estimates, posting a growth of more than 12-fold for its fiscal third-quarter profit.
Mosaic reported that its quarterly profit surged to $520.8 million as the fertilizer maker recorded strong demand brought on by higher crop prices. The company posted earnings of $1.17 a share, topping analysts' estimates for a quarterly profit of 95 cents a share.
Monsanto reported this morning that its profit during the second-quarter more than doubled to $1.13 billion, or $2.02 per share, boosted by strong corn seed and herbicide sales. These numbers are up from $543 million, or 98 cents per share reported in the same period a year ago. Analysts' forecast was for earnings of $1.72 per share in the quarter, according to Thomson Financial.
The company's quarterly revenue surged by a respectable 45% to $3.8 billion, compared with $2.6 billion a year ago. For this period, the producer of genetically modified seeds counted strong corn seed sales, which climbed to $1.7 billion. The company benefited from strong demand from the U.S., North America and Europe-Africa regions that helped to increase revenue. The increasing use of the grain to make ethanol, a gasoline substitute, also came as a catalyst for the company's quarterly sales.
About a year ago, I had a chance to hear a presentation by Laurence Fink, who is the CEO of BlackRock (NYSE: BLK), which is a mega money manager. Simply put, he was a bit concerned about the markets. With the huge amounts of leverage, he thought that investors weren't getting enough premium for the potential risk.
Yes, it was a good call. And the upshot is that BlackRock has been a stellar performer.
Well, now Fink is more sanguine. In fact, in this week's Barron's [a paid publication], there is an interview with him.
What's his take? First of all, he think investors should dip into equities, such as the big caps that benefit from global growth. Some of his choices include: General Electric (NYSE: GE), Monsanto (NYSE: MON), United Technologies (NYSE: UTX) and Boeing (NYSE: BA).
He also likes high-grade mortgage debt. Basically, the spreads are attractive (and seem to account for the risk levels).
Finally, Fink is bullish on overseas markets, especially commodity-based counties like Brazil.
Monsanto (NYSE: MON) shares are trading higher today after the company announced that it has finished its acquisition of Marmot, SA, which includes the Latina American seed company Semillas Cristiani Burkard. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on MON.
Shares of agricultural producer 
When natural disasters happen, there are always some companies that can turn the circumstances in their favor. Recent downpours in the Midwest provided such an opportunity as they came not only with high damages for people in the area, but also with floods for crop production, causing even higher agricultural commodity prices. The rise in corn and soybeans prices could easily lead to an increased demand for seeds, agricultural equipment, and fertilizers. BusinessWeek 
Farmers are paying more for supplies to grow their crops and they're passing those rising costs onto consumers. The 
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About a year ago, I had a chance to hear a presentation by Laurence Fink, who is the CEO of 
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