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

Monsanto Facing Some Hard Decisions

When I last wrote on Monsanto (NYSE:MON), I thought the company was still in for some rough quarters as corn prices continued to weaken, but that M&A chatter would continue to swirl. And that's exactly what has happened.

Monsanto's financials are wilting in the face of weak corn prices and more aggressive discounting from rivals, but Bayer (OTCPK:BAYRY) has come forth as a bidder for the company. Bayer hasn't come forward with an especially strong bid, though, and it remains to be seen whether Monsanto can coax a more appropriate bid from Bayer, get BASF (OTCQX:BASFY) involved, perhaps have another go at Syngenta (NYSE:SYT), or go it alone and deliver the benefits of its strategic partnership strategy.

On its own merits, I think Monsanto is at its fair value, as I do believe the soy business will start delivering in a big way and that the company has some high-potential pipeline projects reading to deliver in the coming years. While a bid from Bayer of $130 or higher would obviously represent upside, there is the risk that Bayer walks away or that the company pursues an alternative (like a venture with BASF) that may be worth more in the long term, but will require a great deal more patience.

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Monsanto Facing Some Hard Decisions

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: Monsanto: Changing With The Times, Or Losing Focus?

Agribusiness giant Monsanto (NYSE:MON) is no stranger to controversy, and I can't imagine that the company's aggressive attempts to bring Syngenta (NYSE:SYT) to the bargaining table are going to ease concerns. In addition to worries about antitrust, divestitures, and synergies, there is at least an argument to be explored that Monsanto's shift away from a reliance on seeds and traits is part of a wider issue of the company losing focus on what made it such a winner in the ag space.

I don't really share the "losing focus" concern, but I do think Monsanto's interest in Syngenta, its Climate Corp business, and its ventures into biologics and RNAi may reflect a growing need for the major players in agriculture to touch multiple parts of the value chain to maximize their value-add.

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Monsanto: Changing With The Times, Or Losing Focus?

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: BASF Continues To Execute A Proven Plan

BASF (OTCQX:BASFY) remains what it has long been - a very large, very diversified, and very well-run chemical conglomerate. A year ago I thought the shares didn't look all that promising on a risk/return basis and the ADRs have since underperformed (down about 21%) as have the local shares (BAS.XE) (down about 4%). DuPont (NYSE:DD), Dow (NYSE:DOW), Bayer (OTCPK:BAYRY), and Clariant (OTCPK:CLZNY) all would have given you a better capital returns performance, though all but DuPont have performed pretty well on a year-to-date basis.

For all of the fine attributes I see in BASF, I still can't get that excited about the shares today as a new money investment. Monsanto's (NYSE:MON) aggressive pursuit of Syngenta (NYSE:SYT) could very much work in BASF's favor, but against that upside are risks and concerns tied to growing global capacity in may of BASF's product categories and efforts by rivals in Asia to move further along the value curve. There are worse things than owning fairly-valued shares of a very good company, which I believe BASF is, but I'm not so excited about the valuation that I want to rush out and buy the shares.

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BASF Continues To Execute A Proven Plan

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: American Vanguard Starting A Long Road Back

Back in my Wall Street days, American Vanguard (NYSE:AVD) would have been called "a stock split the hard way", as the shares have dropped almost 50% over the last year on persistently weak sell-through of soil insecticides and herbicides for corn. Weather has had an impact, as have acreage switches to other crops and less insect pressure, but the fundamental issue is that management significantly overestimated the on-the-ground demand for its products and is now stuck working through inflated inventories and inefficient overhead utilization. I don't think the positives that moved the stock in 2013 have all vanished, but management has a lot to prove before these shares can move back into the $20's.

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American Vanguard Starting A Long Road Back

Seeking Alpha: FMC Corp's Exceptional Performance Comes At A Cost

There are a lot of really good things about FMC Corporation (FMC). The company's unusual model in agricultural chemicals allows for exceptional margins, and the company's food/nutrition business is a leader in close to two-thirds of its operations. The only fly in the ointment is that investors are well aware of FMC's exceptional growth and its different model, and the valuation on these shares is not low.

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FMC Corp's Exceptional Performance Comes At A Cost

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: 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

Investopedia: Monsanto Has Eased Off, But Still Not Cheap

Monsanto (NYSE:MON) generates a huge volume of press and public interest, but the reality is that the public bickering about GM crops has very little quarter-quarter impact on the decisions that farmers make in the U.S. and Latin America. The bigger issue for Monsanto, frankly, is that crop plantings seem to be coming in lower overall than expected and more of the earnings story revolves around the volatile and unreliable herbicide business. Though I continue to see Monsanto as a core holding, expectations for this company are not what I'd call conservative and investors may want to see how this apparent reallocation away from ag stocks plays out before stepping in to buy.

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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

Investopedia: Why Is Monsanto Evil, But DuPont Isn't?

As I explored almost a year ago in the case of Wal-Mart (NYSE:WMT) and Amazon (Nasdaq:AMZN), public perception is a curious thing. Two companies can do many of the same things, and yet one will take a much larger amount of flack and criticism for it. Or, as the Seattle Organic Restaurants website says, “the difference between a rainforest and a jungle is that a rainforest has a PR agent”.

To that end, I find it very interesting that Monsanto (NYSE:MON) is one of the most-hated companies on the planet, with the internet and social media full of stories and passed-around memes that declare it to be one of the worst companies in the world. And yet, DuPont (NYSE:DD) is just as big in genetically-modified seeds and agricultural chemicals, and pursues largely the same policies as Monsanto with respect to pricing, IP enforcement, and so on.

So it merits the question – Why is Monsanto evil, but DuPont isn't?

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Seeking Alpha: American Vanguard Should Reap A Better Multiple

American Vanguard (AVD) has long been a volatile small-cap stock. Some of that can be chalked up to the vagaries of the agricultural chemicals market, a business where the likes of FMC Corp. (FMC) have also had ample ups and downs. Some of it, too, can be attributed to the fact that investors in agricultural stocks often seem to look and think no further than the next harvest, so planting, weather, and harvest data can make these stocks move in the opposite direction of fundamentals.

To that end, I think it's worth checking out American Vanguard today. Although I do have some long-term concerns about the company's position vis a vis new GM crops that target lucrative parts of the company's business, I believe there's a very good chance that the stock will deliver stronger results in the short term as capacity upgrades and strong marketing support from partner Monsanto (MON) lead to much better herbicide and pesticide sales.

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American Vanguard Should Reap A Better Multiple

Investopedia: DuPont's Cyclicality Seems Overpriced

It seems like there is a segment of the investment community that is committed to believing that DuPont (NYSE:DD) will eventually figure out the right mix of businesses that will let it transcend its historical cyclicality and volatility. To be fair, management at DuPont has always been willing to move into higher-potential areas like agriculture, performance materials, and nutrition, but these efforts have never managed to decouple the close correlation of the company's performance and global GDP growth. Accordingly, I'm not sure I'd want to pay a premium to buy these shares.

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