Wednesday, June 2, 2010

More on Goldman's 'Conviction Buy' on Monsanto (MON)

Following up on "Goldman Brands Monsanto ‘Conviction Buy’" (MON) here's some color via Notable Calls:

Monsanto (NYSE:MON): Bad news discounted; upgrading to Buy, add to Conviction List - Goldman Sachs

Goldman Sachs is making a significant call on Monsanto (NYSE:MON) upgrading to the stock to Buy from Neutral with a $65 price target (prev. $67) & adding the name to their Conviction Buy list.

MON has been the worst-performing chemicals stock in 2010 and the second-worst stock in the S&P 500. This former growth manager favorite has unraveled with its glyphosate herbicide franchise massively disappointing and its key Seeds and Traits franchise suffering from new product missteps. Goldman believes the bad news is exhausted, investor sentiment can bottom, and, with the shares below the $50 mark, now is the time to start building positions—they see 33% upside. The next possible positive datapoints could come at MON’s annual Whistle Stop Tour on 8/11/10 and as US harvest results begin filtering in late September 2010.

The last few quarters have witnessed an amazing fall from grace for the world’s leader in ag biotechnology. A well-deserved reputation as a consistent “beat-andraise” story with a one-time 40X forward P/E valuation multiple has unraveled, resulting in a shocking transformation that leaves MON as a “show-me” stock.

While many of the cracks in the MON story are troubling, Goldman believes most of the bad news has been factored into estimates and sentiment....MORE
...Notablecalls: The sentiment in Monsanto (MON) has become so very negative over the past 6-9 months as generic Roundup has eaten into their profit margins. Yet, as Goldman notes, even the Chinese can't compete on price forever. The tipping point for pricing may be near.

Around these levels I would consider MON as a coiled spring, waiting for anything (anything!) positive to spring upwards.

I'm guessing the blessing from Goldman could work as a +ve catalyst here and cause the stock to trade up by 5% today, putting $51-$51.50 levels in play. All we need is for the general tape to hold.
That last line is true of just about everything I'm looking at. The perils and profits of high-beta.