Saturday, February 11, 2012

Monsanto (MON) 2012 Review

Monsanto (MON) is a supplier of technology based solutions and agricultural products to growers.

It has grown profits and dividends 25-35% over the past ten years earning between 13-14% return on equity. The economic slowdown accompanied by softening demand and lower grain prices has led to a 50% reduction in MON’s earnings and stock price in 2010. While these factors will impact earning growth near term, the longer term outlook is still promising because:

(1) new product innovations provide a competitive advantage,

(2) it maintains a huge R& D effort focused on improved crop yields,

(3) its comprehensive effort to reduce costs and mitigate weather and pricing risks to its cost structure,


(1) its international exposure subjects it to currency fluctuations and political risks,

(2) intense competition,

(3) its large R&D budget opens it to potential new product disappointments.

MON is rated A by Value Line, has a 14% debt to equity ratio and its stock yields 1.7%.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2002
MON 1.7% 6% 35% 7
IND 1.9 7 30 NA

Debt/Equity ROE EPS Down Since 2002 Net Margin Value Line Rating
MON 14% 14% 1 14% A
IND 32 18 NA 9 NA


Note: MON stock has made virtually no progress off its March 2009 low, though it managed to initially surpass the down trend off its June 2008 high (red line). MON never successfully challenged its November 2008 trading high (green line). Long term the stock is in a trading range (straight blue lines). Intermediate term, it is in an up trend (purple lines). The wiggly blue lines are Bollinger Bands. The Aggressive Growth Portfolio owns no MON shares. The upper boundary of its Buy Value Range is $47; the lower boundary of its Sell Half Range is $132.

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.