Forgive the silly allusion, but I needed a snappy entry to counter a depressing day for one of our Jacksonian Stalwarts: [[MON]]. I figured Mr. Smiling Rastaman can offer some surcease to our collective agita. MON got some bad news today, courtesy of it’s own management. I’ll boil it down to this piece from the release:
For the quarter ending May 31, the St. Louis-based agricultural products provider (MON 79.88, -5.37, -6.30%) said it now expects to earn $1.15 a share, down sharply from its prior target range of $1.60 to $1.62 a share. The reduction caught investors off guard. Analysts polled by FactSet Research were looking for earnings of $1.61 a share, on average.
Yeah, that’s a pretty big reduction in earnings, but it turns out it’s all about some extra competition in it’s herbacide business, which is frankly, the ass-end of it’s value proposition, providing less than a third of overall gross margin.
Seeds and traits are where it’s at, ladies and germs — that’s what garners the high end of MON’s 60+% gross margins and almost 30% net margins. You think you can make that kinda coin selling weedkiller?
No sir, it’s the intellectual property that make this market leader a Jacksonian Core Holding, and why I will continue to trade around my position rather than part with it. Here’s the IP driver update from that same press release:
The company’s seed and traits business, however, continues to show strength. The company now forecasts the segment to deliver gross profit toward the upper end of it’s the range of $4.4 billion to $4.5 billion it forecast for the year.
“The projected increase of more than 15% year over year reflects the combination of greater value, growth in the company’s branded seed businesses and expanded use of Monsanto’s trait technologies,” the company said in a release.
So granted, I was a little late in not selling some calls when MON banged against it’s 61.8% fib line (daily) last week (although I did mention it to you, readers). Thanks goodness, I did part with the “booster” calls I had bot in the high seventies around their second quarter earnings announcement. Here’s the good news, I will be buying “booster calls” again here, soon, and most likely tomorrow. I will alert you, but here’s what I’m seeing:
You can see where my target is on the daily, which is showing pretty seriously oversold conditions (thought i can always get more oversold, can’t it?) — right at the retest of that old downtrend line. Now, the weekly is relatively coincidental, with the long term 61.8% fibonacci line looking like nice resistance at a little over $78.35 or so.
I will be watching these levels tomorrow, and likely buying July $75 calls to take advantage of a bounce to at least $84-$85.
One last update… the precious metals continue to consolidate here, and I think I shall be taking a strong look at adding some junior silver [[EXK]] tomorrow, and perhaps adding [[EGO]] to the Jacksonian Core, as well. Best to everyone.
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| 27-May | % Change | |
| ANDE | $ 24.59 | -1.44% |
| GDX | 41.22 | -1.48% |
| GLD | 93.45 | -0.33% |
| IAG | 10.45 | -1.04% |
| MON | 79.88 | -6.30% |
| NRP | 22.93 | 0.79% |
| PAAS | 21.89 | 1.16% |
| RGLD | 44.04 | -2.95% |
| SLV | 14.58 | 1.11% |
| SLW | 9.40 | -0.95% |
| SSRI | 20.77 | -0.24% |
| TBT | 57.14 | 3.76% |
| TC | 8.71 | -0.23% |
| TSO | 16.91 | 1.08% |
| Avg % | -0.51% |
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Much better Jake. 🙂
Jackson would have hated MON with a passion.
Jackson hated nasty little girls the most.
Try to act more ladylike around here, eh?
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Have a nice Roundup(tm) COCKtail (on the rox) big boy!
Jake – the seeds and traits are engineered to be “roundup ready.” Could pressure in commercial Roundup sales be a leading indicator of weakness in seeds and traits?
Jake,
Any thoughts on GLW (Gold Wheaton)?
Thanks,
I notice that SLV held up under pressure there yesterday.
Boom,
The “roundup readinesss” of the seeds is an increasingly smaller part of their seed & traits business (although it provided the genesis). They are thinking bigger than that these days.
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Sleepynap,
I like GG very much here, and was thinking about putting it into the JCHP with EGO, but may wait for a pullback.
GLW is a Vancouver stock? At a quarter? Pass. I will only mess around with stuff traded here… the liquidity nightmare is unnecessary.
As an aside — I have a ton of the “real” GLW, which is Corning’s symbol here.
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Cuervo — Yes, silver (and gold) look very strong here, but silver may be stronger in the near term. Going after some EXK today at some point. Will report.
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Damn! Just tried to buy the MON June 75’s for $5.10 (the Ask) about thirty minutes ago and found I had neglected to fill out the options application for my IRA (where the free cash resided at the moment). Blew a good deal of time filling out the online application and now need to wait up to four days for approval. Meanwhile, the Bid for those same little suckers I had in my sights is up over 15% and climbing.
Let that be a lesson to those with similar intent. Make sure your gun is functional before attempting to line up the sights and pull the trigger. That means checking all the accounts, not just the one you usually trade options in.
Meanwhile, I am sorry to report that CDE still has my balls in a vice. I am down low single digits in the name. Hopefully, I will be able to pull them out intact and report victory to you soon. (I know you hate the name, Jake, but I am stubbornly convinced it will turn)
Off to the local antique mart to buy that pile of Kennedy 1/2 dollars (40% silver) I saw marked for $2 each last week. The local flea circus doesn’t seem to realize their melt value is now 10% higher than their asking price.
Hi Ho Silver!
Outdoors — don’t feel bad, I even got a little CDE the other day, when RC was pushing HL (another dog).
It’s up about 20 cents today, so all is not lost.
Finding bags of silver coins today is much like finding buried treasure — a rare but pleasurable occasion.
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Update: NEW POST!
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MON traded like shit yesterday.
After having declined $8 the previous 4 trading days, I expected that once the news was out yesterday the stock would gap down at the open and dip buyers would cause a reversal higher. Instead it was sold aggressively the entire day on 3x average volume and closed within pennies of the low.
While seeds and traits is definately the treasure, Roundup is not an inconsequential part of the biz and Roundup’s margins appear to be permanently impaired. Management’s attempt to continue to hold it out as a premium brand is being rejected by the market in favor of generics as reflected by the sharp drop in end user volume demand.
If my interpretation is correct, is it credible to not take down full year guidance when it appears Roundup’s end of life is accelerating faster than expected? I think investors are grappling with how to value MON if Roundup’s end of life is in fact occuring faster than previously expected.
I know they spend boatloads on R&D and have tons of stuff in the pipeline, but the rollouts are on timelines that are difficult to accelerate so the small hole in the cash flow created by this Roundup development isn’t easy to fix.
MON is a market darling so all of this may not matter, but I didn’t like the announcement or how the stock traded yesterday. Regardless of what the charts say, I would not be surprised to see it go lower.