The Buzz is Gone - the Bees are Dead
By Johann Bergfort
Don’t tell my girlfriend, she wouldn’t believe you, as she just got stung on the forehead only yesterday. But apparently the bees are gone. Yes those little annoying insects that cross pollinate plants – are disappearing, not coming back to their hives, taking a long walk off a short honeycomb.
No one knows why the bees are disappearing; there isn’t a coherent explanation yet. But it could mean an end to pollination. Which to my mind signals profit.
Approximately one third of the entirely food production depends on bees’ pollination. Affected are almost every kind of fruit, vegetables and fodder.
Bees are an economic factor worth more than $10 billion in the USA and in Europe.
Franken-flakes need no bees
Monsanto (MON) the large agricultural company might be a way to play this phenomenon. The company has genetically engineered agricultural products, which survive without bees.
Farmers around the world use its innovative products to address on-farm challenges and reduce agriculture's overall impact on our environment.
Monsanto now has approximately 26% market share of the U.S. corn market. On April 4, the company reported first-quarter earnings of 98 cents per share, up from 80 cents in the prior-year quarter and four cents above expectations. Overall revenues rose by 19% to $2.62 billion, above analysts’ estimates of $2.44 billion.
The ethanol induced agriculture boom should continue to support Monsanto’s earnings momentum and drive the stock to new highs.
Monsanto has been a rocket ship. It’s climbed from $10 in 2002 to $60 today. It has a quarterly revenue growth of 18% and a forward P/E of 27 – so it’s not exactly cheap. But if you like a dividend-paying blue chip, in a solid up trend – you could do a lot worse. I’d recommend buying Monsanto under $62 for a long-term hold.
An alternative would be Archer Daniels Midland (ADM). The company converts corn and wheat, which do not need any bees so that they probably could be substituted.
Archer Daniels Midland Company is one of the largest agricultural processors in the world. Serving as a vital link between farmers and consumers. They take crops and process them to make food ingredients, animal feed ingredients, renewable fuels and naturally derived alternatives to industrial chemicals.
ADM reported a 4 percent increase in fiscal third-quarter profit to $362.9 million. The per-share results of 56 cents came in lower than Wall Street expected. Analysts forecast earnings of 62 cents per share, according to Thomson Financial. The news drove the stock down $4 to $36 and change. It might be a good idea to buy the calls here and sell out after the gap gets filled, but as a long- term hold I’d rather be in Monsanto.
All the best,
Johann Bergfort, Taipan intern
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