(By Jon D. Markman) 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 Friday (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% (2008) and 26.8% (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.
