Seeking Alpha: In A Bad Ag Market, Can Monsanto Do Enough That Matters?

Monsanto (NYSE:MON) wasn't the first to feel the pinch from the negative ag cycle, and it certainly hasn't suffered the most, but weak grain prices have nevertheless done their damage. Monsanto's shares are down about 10% from my last update, and about 20% over the last year, as investor expectations and analyst targets have dropped significantly in the face of weak crop pricing and pinched farmer budgets.

There's always a big "but" that goes with forecasting the results for any ag-sensitive company and that is the unpredictability of the underlying market; a really bad (or good) crop could shift prices dramatically and change MON's operating environment quickly. That said, a lot of those fluctuations even out over time, and I believe the company's deep, high-quality R&D operation is a strong source of future value.

My expectations for Monsanto were lower than the Street's prior to this most recent reckoning, so my revisions are correspondingly more mild. I still expect MON to be a 10%-plus long-term grower, supporting a $105 fair value today and maybe some upside if a deal for Syngenta (NYSE:SYT) or another strategic target materializes.

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In A Bad Ag Market, Can Monsanto Do Enough That Matters?

Seeking Alpha: FMC In The Right Businesses, But The Valuation Could Be Better

FMC (NYSE:FMC) has been making a lot of smart moves to better position the company for above-average long-term growth in multiple attractive specialty chemical markets. The Cheminova deal wasn't cheap, but added good diversification and offers expense-driven synergies, while the sale of the alkali business came at a better than expected price. Longer term, it's hard not to like crop protection, health/nutrition, and lithium.

I wasn't thrilled with FMC's valuation back in April of 2014, and the shares have fallen almost 30% since then, underperforming BASF (OTCQX:BASFY), Bayer (OTCPK:BAYRY), Dow (NYSE:DOW), and Monsanto (NYSE:MON) over that time. I'm still not enamored with the valuation today, but I do believe there is an opportunity for the company to outperform on both sales growth and margin leverage.

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FMC In The Right Businesses, But The Valuation Could Be Better

Seeking Alpha: Sirocco Isn't The Deal Canada Lithium Investors Want

Tis the season of tougher times for many mining companies. Thompson Creek (TC) is groaning under the threat of not being able to raise enough cash to complete its expansion plans, Mercator Minerals (OTC:MLKKF) sold itself at a fraction of NAV due to severe funding/cash issues, and even the major players like BHP Billiton (BHP) and Rio Tinto (RIO) are pulling back on their capex and exploration budgets. In that regard, then, there's nothing so particularly strange about Canada Lithium (OTCQX:CLQMF) (CLQ.TO) agreeing to a deal with Sirocco Mining (SIM.TO) that buys them time, breathing room, and cash.

Although arguably necessary, this isn't the deal that investors in Canada Lithium are hoping to see. With a hard rock lithium mining asset in Quebec that could produce over 10% of the world's lithium carbonate, the hope here is that a major lithium producer like Rockwood (ROC), FMC (FMC), or Socieded Quimica y Minera (SQM) steps up and acquires Canada Lithium as a means of diversifying its lithium assets. I believe that's still a viable expectation, and although this is a speculative, high-risk opportunity, the de-risking of Canada Lithium's balance sheet and the prospects for profitable near-term production make this a name worth watching.

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Sirocco Isn't The Deal Canada Lithium Investors Want

Seeking Alpha: Rockwood Is Lean And Mean, But Not Overlooked

After a series of deals, Rockwood Holdings (ROC) management now has the business it says it wanted. In agreeing to sell the ceramics, clay-based additives, and pigments businesses, Rockwood is not only about to be flush with cash, but a company highly focused on and committed to its lithium and surface treatment businesses.

That's perfectly fine with me, as I think there are solid reasons to expect good growth in lithium demand and I believe Rockwood can put surplus capital to work expanding the surface treatment operations through select/precision acquisitions. What's not so fine with me is the valuation. I get that many investors are enamored of what electric vehicle adoption could mean for future lithium demand, but I'm not as excited about an opportunity where I have to pay more than 10x EBITDA just to get today's valuation on the shares.

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Rockwood Is Lean And Mean, But Not Overlooked

Seeking Alpha: The Street's Ag Blues Seem To Be Weighing On American Vanguard

This has been a frustrating year for American Vanguard (AVD) and its shareholders. While the stock has done a fair bit better than fertilizer names, it has absolutely lagged other crop-related stocks like Monsanto (MON), DuPont (DD), and FMC (FMC). Bad weather hit the company hard around mid year, and even though results (and the stock) have recovered since, the damage was already done.

In my view, American Vanguard's prospects and appeal as a stock have a lot to do with your time frame. It looks as though the company is going to go into next year with more inventory than normal, but the Street is already well aware of this issue. There are also more rumblings about competition, but I have to wonder if this is a real change in philosophy on the part of major chemical companies or more of a passing fancy. American Vanguard does seem undervalued today, at least enough so as to deliver an expected long-term return in the double-digits, but with the markets turning skittish on the ag sector, this is likely only a good name for more patient investors.

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The Street's Ag Blues Seem To Be Weighing On American Vanguard

Seeking Alpha: Wet Weather Soaks American Vanguard, But Analysts Look All Wet

Using discounted free cash flow as a primary valuation tool comes with certain drawbacks. Looking at the reaction to American Vanguard's (AVD) warning on second quarter earnings brings one of the biggest back to mind - namely, that sell-side analysts and buy-side investors don't look at stocks this way and it can create significant disruptions for more long-term-oriented investors. While American Vanguard shares are going to sit in the sin bin for a while now, and a lot of the positive 2013 momentum may be sapped from this stock, relatively little about the long-term has changed.

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Wet Weather Soaks American Vanguard, But Analysts Look All Wet

Seeking Alpha: Monsanto's Start To Fiscal 2013 Is Good, But Not Perfect

The Street is in one of those stretches where it wants to like Monsanto (MON), so it doesn't look like analysts or investors are being too pointed in how they approach results for the fiscal first quarter. While the results were indeed solid overall, and Monsanto remains a high-quality play in the agriculture space, there were a couple of details that investors shouldn't ignore before paying up for what is by no means a cheap stock anymore.

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Monsanto's Start To Fiscal 2013 Is Good, But Not Perfect