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Published: November 23, 2009
Is it time to buy Monsanto Co. (NYSE:
MON)?
My research tells me that the answer to that question is a
definite “yes.”
When it comes to basic materials investments, we’ve talked a lot
about gold and steel, but don’t forget the agricultural goods.
As you can see in the chart that follows, St. Louis-based
seed-producer Monsanto last week broke out of a long downtrend
and consolidation.
Historically, this is a great time to own
Monsanto shares, anyway. In each of the past nine years, the
company’s stock has rallied an average of 8.6% from Nov. 20
through Dec. 9, according to data from Markethistory.com.
Looking out farther, and considering the 35-trading-day span
that started on Nov. 20, Monsanto has a perfect record,
with an average 15.2% profit. That span would take you into the
first week of January. The last two years yielded returns over
that span of +16.3% in 2008 and +26.8% in 2007.
If you’re into options and understand the risks, Monsanto’s
December and January call options are pretty cheap because the
stock’s volatility has been so low. If you got the 15% average
advance into January, the price would be $88. I told my
Strategic Advantage subscribers late last week to consider
buying the $85 calls struck in December (MONLQ or MONAQ).
They’re up quite a bit since, but still worth a shot for the
gamblers in the crowd.
Monsanto is Bullish
The company appears to be pretty bullish on its own future.
A quarter of a century ago, Monsanto helped establish a new
research campus in Chesterfield, Mo., a city that’s a major
western suburb of St. Louis.
Last week, Monsanto reclaimed that bit of its history by
agreeing to acquire the Chesterfield Village Research Center
property from Pfizer Inc. (NYSE: PFE) for $435 million,
according to media reports. The move will not only help ease a
major space crunch at Monsanto’s Creve Coeur headquarters, it
also advances the company’s plans to expand its
research-and-development operation. Indeed, Monsanto already
plans to invest about $1 billion during the current fiscal year
in the development of new corn, cotton and soybean seeds.
“St. Louis is already a home to a large percentage of our R&D
activity, and this allows us to consolidate our capabilities
here and eventually expand them,” Monsanto Chief Technology
Officer Robb Fraley told the St. Louis Chinese American News
in an interview.
-- Jon D. Markman
Contributing Editor
Money
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