Will Precision Ag Take American Vanguard To A New Level?

For what it is, American Vanguard (NYSE:AVD) is a good company. This small agricultural chemicals company does not have the R&D resources to compete with companies like Syngenta (NYSE:SYT), Bayer (OTCPK:BAYRY), or BASF (OTCQX:BASFY) in novel crop protection ingredients, nor the scale to compete with companies like ChemChina in large-scale generic crop protection, but it does have a solid record of acquiring and marketing niche products for an array of row crops, fruits, vegetables, and cotton.

The challenge I have with American Vanguard is when the market runs ahead of itself by overestimating what the company can be, as has happened in the past when investors thought the corn boom established a "new normal" for sales or when Zika would lead to a major sales opportunity for its mosquitocide. Now I have similar concerns about SIMPAS, the company's entry into precision agriculture. While the SIMPAS system seems legit, I think the sales effort will be challenging, and I think the company will always be challenged by its lack of proprietary R&D capabilities. As I think $15 to $17 is a reasonable estimate of fair value, I don't see all that much upside today.

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Will Precision Ag Take American Vanguard To A New Level?

Monsanto Holding Serve Ahead Of Regulatory Debates

There's no question that the biggest value-driving events for Monsanto (NYSE:MON) are yet to come, as this leading agriculture technology company will have to go through what is sure to be a rigorous regulatory oversight process to get to the finish line with its would-be suitor Bayer (OTCPK:BAYRY) and deliver the $128/share in cash that a successful deal promises.

In the meantime, Monsanto is Monsanto. The ag market is still in recovery mode, and 2017 is not likely to be a banner year for acreage, but Monsanto is doing well with new launches in South America and continues to upgrade its product portfolio in North America. What's more, Monsanto has long been an R&D-driven story and management hasn't been shy about continuing to reinvest and expand that research pipeline. While the shares do trade above my estimate of standalone fair value, it seems as though today's price factors in only about a 20% chance of the deal going through, and that strikes me as a reasonable risk/reward.

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Monsanto Holding Serve Ahead Of Regulatory Debates

S&W Continues To Plant Seeds For Future Growth

The ag sector has shown a little life since the last time I wrote on S&W Seed (NASDAQ:SANW), but this small grower of alfalfa seeds has done better than most with better than 15% improvement in the share price since the time of that late March piece. While the company's growth in recent quarters has been hampered by low inventories (caused by disappointing yields due to weather), the company has shown good discipline with its seed pricing and sourcing, as well as its corporate costs.

The rebound in the share price has taken some of the easy money off the table, but the company has made multiple moves that should improve the stability and growth potential of the business over time. Diversifying into new crops seems like a risk worth taking, but the key for the company, in my view, remains its ability to improve seed prices and push adoption of higher-value seeds by emphasizing the yield and value advantages of its hybrids.

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S&W Continues To Plant Seeds For Future Growth

Seeking Alpha: Waiting For The Grass To Grow At S & W Seed Company

The wait goes on for S&W Seed Company (NASDAQ:SANW) (or "S&W") to prove its merits as an under-followed player in the ag space. The shares are down another 17% from my last update, about flat over the last year, and down 40% over the past two years. Weak as that may be, S&W has actually outperformed Monsanto (NYSE:MON) since June and over the past year, as there's been a sharper reaction to Monsanto's negative revisions.

Not a lot has changed from a fundamental perspective since last June, though a disappointing harvest in 2015 is going to have near-term repercussions on margins. The key debate around S&W, at least in my thinking, remains whether the company can successfully shift farmers from public/generic seed varieties and share in a larger proportion of the value created by its yield-enhanced and other proprietary alfalfa seed varieties. My low double-digit annualized revenue growth estimate is hardly conservative, but S&W could achieve it with a combination of low single-digit acreage growth and an improvement in value capture from less than 10% to less than 20% - still well below the 25%-plus that Monsanto and DuPont (NYSE:DD) can reliably get from their corn and soybean varieties.

If S&W can do it, and achieve a long-term gross margin above 30% and a long-term operating margin in the mid-teens, a fair value of over $6 still remains in play after a recent dilutive financing.

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Waiting For The Grass To Grow At S & W Seed Company

Seeking Alpha: Monsanto Making Do, But It's M&A That Everyone Seems To Want

Given the recent announcement of the intention of DuPont (NYSE:DD) and Dow (NYSE:DOW) to combine their operations and Syngenta's (NYSE:SYT) apparent increased willingness to at least consider M&A offers, the question of consolidation in the ag business seems to have rendered Monsanto's (NYSE:MON) near-term performance largely moot. Given the weakness in the ag sector, and ongoing softness in corn prices, that might not be such a bad thing.

I continue to believe that Monsanto is a solid long-term holding in the ag space. The stock is modestly undervalued and carries less operating risk than many cheaper-looking ag stocks. I also continue to believe that Monsanto will find a seat in this game of ag musical chairs, but there is definitely a risk that Monsanto either has to settle for something less than its first choice (or second...) or pay more than it would like to.

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Monsanto Making Do, But It's M&A That Everyone Seems To Want

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: Chr Hansen Is A Rare Story In The Food Sector

On the whole, established companies in the food and beverage space don't typically grow their revenue at more than a low-to-mid single digit clip over the long term. But then, those companies aren't Denmark's CHR Hansen (OTCPK:CHYHY) and aren't leveraged to strong underlying trends in consumer preferences, as well as R&D-driven edges in customer costs and efficiency.

Not unlike Novozymes (OTCPK:NVZMY), CHR Hansen has almost everything I like to see in a company except for an attractive valuation. I do believe that the company has meaningful opportunities to leverage growth opportunities in dairy consumption, probiotics, natural colors, and agriculture, but the stock's valuation already reflects what I believe are generous assumptions regarding growth and the quality of the company.

I'd certainly monitor CHR Hansen in the hope of buying on a market freak-out (whether company-specific or across the market), but the shares today seem priced more for those who are comfortable buying growth almost irrespective of value.

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Chr Hansen Is A Rare Story In The Food Sector

Seeking Alpha: Novozymes And The High Cost Of Greatness

When I first started the process of refreshing and updating my research on Danish enzyme specialist Novozymes (OTCPK:NVZMY), I was really hoping that the end result would be an undervalued and appealing investment opportunity. This is a company that I like a lot and a stock that I want to like. Now, readers can carp about whether wanting to like a company pollutes the research/analysis process, but I see no reason to hide the fact that I think Novozymes is a well-run company with a strong leadership position in a sizable but growing industry.

Valuation is the issue. I realize that investors should expect to pay up for quality, and Novozymes's nearly 50% market share in the industry and strong history of ROIC generation are certainly marks of quality, but I'm not comfortable with the sort of growth/certainty that appears to be factored into the valuation today. Investors less sensitive to valuation may find more to like here (particularly after the 20% decline from the 52-week high), as this is the sort of situation where price is really my only major hang-up.

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Novozymes And The High Cost Of Greatness

Seeking Alpha: S & W Seed Has A Huge Opportunity, But The Ability To Execute Is The Key Risk Factor

I suppose it would be easy to blame S & W Seed's (NASDAQ:SANW) ongoing share price weakness on the overall malaise in the ag sector. The shares are down another 15% or so from when I last wrote about the company, but at their worst they were down closer to 50%. That's not just "well, it's a tough market"; S & W has made more than a few mistakes, leaving the Street to wonder if management can really execute on what seems like a robust opportunity in the alfalfa market.

The acquisition of DuPont's (NYSE:DD) alfalfa business should mark a major point of transition for the business, as it brings immediate credibility and scale to the company in the dormant alfalfa variety market (80% or so of the U.S. alfalfa market and 50% of the world market). What's more, the company's commitment to improved varieties of alfalfa seed (GM and others) should lead to more pricing power. But it all comes back again to the question of execution.

I believe the market opportunity can support high teens annualized revenue growth and operating margins in the mid to high teens over the long term, but that's a lot of benefit of the doubt for a company that thus far hasn't earned it. That's how it is with emerging companies, though - if you want to get in early and get the really big long-term gains, you have to accept an elevated risk; by the time the question of management's ability to execute (and/or whether the alfalfa market can be what I believe it can be) is answered, the opportunity to get in at a low price will be gone.

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S & W Seed Has A Huge Opportunity, But The Ability To Execute Is The Key Risk Factor

Seeking Alpha: American Vanguard Paying For The Recent Glory Days

It has been about 10 months since I last wrote about American Vanguard (NYSE:AVD), but things haven't really gotten any easier in the company's core crop protection market. Lower corn acreage, high channel inventories, and benign insect pressure have severely sapped the company's insecticide business and the company is having to deal with suboptimal operating leverage and the cash absorption of excess working capital as it works through this tough stretch.

I believe that if you adjust for the "corn bubble", American Vanguard has continued to operate as a respectable niche crop protection company with mid-single digit revenue growth and the potential to generate double-digit FCF margins. "Potential" is a tricky word, though, and often the difference between value traps and successful investments. Monsanto's (NYSE:MON) aggressive bid for Syngenta (NYSE:SYT) has brought some excitement back to crop protection, but actual results show a tough environment and M&A is unlikely to benefit American Vanguard unless a company not currently active in the U.S. wants to facilitate a market entry. I don't think American Vanguard is particularly expensive here, but the year ahead is still going to be a challenging one for AVD management and investors.

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American Vanguard Paying For The Recent Glory Days

Seeking Alpha: Monsanto Doesn't Need Syngenta

Rumors have once again heated up around the idea that Monsanto (NYSE:MON) is trying to acquire its rival Syngenta (NYSE:SYT). To a certain extent, this is nothing new. Syngenta has long been thought to be a future M&A candidate, with past rumors tying them to Monsanto, DuPont (NYSE:DD), and Dow (NYSE:DOW), but the company's less-than-impressive run of performance (including a poor first quarter in 2015) has apparently reignited those speculations.

As a Monsanto shareholder, I'm hoping the company does not execute this deal. While I like the idea of Monsanto gaining more exposure to vegetables and crops outside of the corn/soy complex, as well as access to Syngenta's technology and diversification into the ag chemical business, I think Monsanto would be hard-pressed to earn a good return on the price paid, particularly after factoring in divestments and the probable reinvestments that need to be made into Syngenta.

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Monsanto Doesn't Need Syngenta

Seeking Alpha: Strong Soy And A Deep Pipeline Supports Monsanto

Investors have unquestionably grown more and more concerned about the ag sector over the past 12 months. Corn and soybean prices have rebounded from the end of September, but soy prices in particular are well below the year-ago levels. With less profitable insurance levels likely for 2015, planted acres may well come under pressure and some farmers may be tempted to skimp on seed traits as a way of saving money.

That's not a great backdrop for Monsanto (NYSE:MON), but I continue to believe that Monsanto will be hurt less than rivals like DuPont (NYSE:DD) and Syngenta (NYSE:SYT). Increasing competition is a risk, as the Chinese have approved traits from Syngenta, Bayer, and Dow's (NYSE:DOW) delayed launch of Enlist will most likely eventually become a full launch (albeit not until 2016).

What Monsanto continues to have in its favor is a meaningful yield advantage that supports its value proposition to farmers, not to mention a deep pipeline of traits targeting disease resistance, yield enhancement, and other productivity initiatives. Add in the potential of precision ag/analytics, biologicals, and RNAI-based products, and there is still a valid argument for Monsanto as a long-term holding even if the next year or two are more challenging.

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Strong Soy And A Deep Pipeline Supports Monsanto

Seeking Alpha: Monsanto Looking To Balance The Near-Term And Long-Term Opportunities

I don't think it's unfair to ask if Monsanto (NYSE:MON) is running out of rabbits to pull out of its hat to satisfy the notoriously short-term attention spans of the Street. The Brazilian launch of Intacta has gone well, the company's Climate Corp offerings are off to a good start, the company maintains an impressive lead in trait development, and has multiple long-term opportunities like dual-stack soybeans, microbials, and biocides. Yet, the company no longer posts big quarterly beats and expectations for next year have come down due in part to weaker fundamentals in the corn market.

I believe it's a matter of perspective. For long-term investors, I don't think there's a better ag company out there, and I expect Monsanto to widen its lead in the seed/traits business, add new opportunities to its productivity/protection business, and really make the most of its Climate Corp offerings. In the short term, though, the shares have held their own with DuPont (NYSE:DD) and Bayer (OTCPK:BAYRY) and beaten Syngenta (NYSE:SYT), but the going may be getting a little tougher.

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Monsanto Looking To Balance The Near-Term And Long-Term Opportunities

Seeking Alpha: Taminco Should Be Switching Over To Cash Generation

The ag chemical market has slowed, as seen recently at FMC (NYSE:FMC) and DuPont (NYSE:DD), but Taminco's (NYSE:TAM) strong market share and diverse end markets for its alkylamine products are serving the company pretty well. The shares have done okay since my mid-February write-up, rising about 10% and doing pretty well relative to direct rivals like DuPont and BASF (OTCQX:BASFY) and the Dow Jones Specialty Chemicals Index. I continue to believe that Taminco is a solid specialty chemical company with better growth and return on capital prospects than its peers, not to mention deleveraging potential, but the valuation is creeping up a bit and this looks more like a "buy on weakness" than outright buy right now.

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Taminco Should Be Switching Over To Cash Generation

Seeking Alpha: BASF Has Lagged On A Relative Basis, But Excels On Its Own Merits

Chemical companies have been basking in some investor love, as companies like Dow Chemical (DOW), Wacker Chemie (OTC:WKCMY), Clariant (OTCPK:CLZNY), and DuPont (DD) have seen their shares rise from 26% to 53% over the past year. With that, the "fair" multiple on sales and EBITDA has risen more than 10% as investors bid up companies that are exposed to global growth and have succeeded in restructuring operations away from basic/commodity markets.

BASF (OTCQX:BASFY) is a tricky stock within that context. BASF is the largest chemical company in the world and a top player in numerous markets. The company also has above-average profitability despite a sizable ongoing commitment to R&D. Despite that, the shares have lagged, as the local shares (BAS.XTA) have risen less than 20% over the past year. Stretch out the comparisons to two or three years, though, and BASF's performance is much more competitive - suggesting that BASF was simply early in getting recognized for its qualities. BASF as a lot of positives from a qualitative standpoint, but it's tough to argue the shares are undervalued unless you believe that it's somehow "different this time" for chemical companies.

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BASF Has Lagged On A Relative Basis, But Excels On Its Own Merits

Seeking Alpha: Valhi Seems Like A Tough Way To Seek Value

Holding companies and conglomerates can offer investors an opportunity to take advantage of management expertise and invest in industries/markets that are otherwise difficult for retail investors to access. Companies like PICO Holdings (PICO), Cosan (CZZ), Brookfield Asset Management (BAM), Macquarie Infrastructure (MIC), and Sprott (SCP.TO) all offer that to some extent, while better-known names like Berkshire Hathaway (BRK.A) and Icahn Enterprises (IEP) could likewise be considered variations along that theme.

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Valhi Seems Like A Tough Way To Seek Value

The Motley Fool: Monsanto Company's Balanced Growth Proves Stronger Than the Headwinds

Agricultural productivity giant Monsanto (NYSE: MON  ) has faced a slightly higher wall of worry here of late. Calendar 2013 was an operationally strong year for the company and one that largely put to rest questions of the company's ability to recapture momentum from DuPont (NYSE: DD  ) . For this quarter, though, there were worries that poor weather, difficult comps, and lower plantings were going to stall out the company's growth.

Analysts needn't have worried, as Monsanto once again delivered a better than expected quarter. With significant near-term opportunities in both corn and soybeans and longer-term opportunities in biologicals/microbials and precision agriculture, there are both growth and value catalysts to keep this stock moving.

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Monsanto Company's Balanced Growth Proves Stronger Than the Headwinds

Seeking Alpha: Taminco Isn't Your Typical Chemical Company

Specialty chemicals is a sector label that really doesn't tell investors all that much, as it includes a wide range of companies with very different end-markets and operating characteristics. That said, specialty chemicals do usually stand out as having above-average full-cycle returns than more commodity-oriented chemical companies. With that backdrop, I think Taminco (TAM) is worth a closer look as a pretty special specialty chemical company.

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Taminco Isn't Your Typical Chemical Company

The Motley Fool: Monsanto Company's Pipeline Is The Real Draw Today

Agribiotech Monsanto (NYSE: MON  ) is always going to be a lightning rod for criticism and scrutiny -- well, more so than other seed trait and chemical companies like DuPont (NYSE: DD  ) , Syngenta (NYSE: SYT  ) , and Dow Chemical (NYSE: DOW  ) . Even so, the company's significant sustained yield advantages and its deep, expanding pipeline make it a company and a stock well worth watching. Should the company's more recent efforts in RNA interference, integrated farming planning/management, and biologicals pay off, there could appealing upside to today's price.

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Monsanto Company's Pipeline Is The Real Draw Today

Seeking Alpha: Bad Weather And Delayed Sales Have Pummeled S&W Seed Company

The market has pretty thoroughly scrubbed out the excess enthusiasm that took S&W Seed Company (SANW) up from less than $5 in August of 2012 to over $11 earlier this year. Not only is S&W some ways away from become the "Monsanto (MON)/DuPont (DD) of alfalfa", but I suspect the rise and fall in the shares can also be tied to the idea of S&W as a stevia play.

S&W certainly disappointed the Street with its fiscal first quarter results, but I think it's worth noting that most of went wrong was outside of the company's control. More to the point, I think there's still a very valid story here revolving around improved margins, better pricing, and the introduction of varieties that will capture more of the potential global alfalfa market. It's going to take longer for that story to unfold, but a revised fair value around $9 still makes this a name worth consideration from aggressive risk-tolerant investors.

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Bad Weather And Delayed Sales Have Pummeled S&W Seed Company