With a market cap of $56 billion and a one year stock price growth of around 40%, Monsanto Company (NYSE:MON) looks like a wonderful investment. Having squeezed most other agribusinesses out of the market, Monsanto also has no real competitors. A cash position of $4.7 billion and a total quarterly revenue of over $3 billion makes this stock even more attractive.
So what's the buzz (all puns intended)? Why would a stock like this ever go down? Besides the grand scale die-off of "our friend the honeybee," here are five good reasons why this Foolish blogger thinks this stock's growth rate is not sustainable, and why a Foolish investor should run the other way.
Monsanto has maintained a virtual monopoly over competitors in the agricultural seed business by aggressively enforcing its patents, particularly for its Roundup Ready or Roundup pesticide-resistant seeds. The last patent for these seeds expires in 2014, opening up the market to companies such as Dupont. Monsanto Company (NYSE:MON) has announced it will allow farmers to save seeds and not repurchase them after the expiration event, eliminating revenue. What will replace this revenue stream? And what is to keep Dupont, a strong competitor, from literally eating its lunch?
Monsanto Company (NYSE:MON)'s public opinion scores are dropping. The company is known for either creating or having influenced some controversial issues, including the following:
--Agent Orange --Saccharin --PCBs --Polystyrene --Dioxin --Petroleum-based fertilizers that kill beneficial soil microorganisms --Roundup, which has been linked to butterfly and honeybee mortalities as well as to the appearance of "superweeds" that can't be easily killed (just like the super bacteria developing through the overuse of antibiotics) --Bovine growth hormone, which has been linked to prostate, breast, and colon cancer --GMOs or genetically modified crops, which have not been fully tested for human health and safety and are actively being banned in some countries, such as Hungary
Given this lovely list, it's no wonder that on May 25 thousands gathered to protest Monsanto Company (NYSE:MON), its practices, and the dangers of GMOs. Although Dupont also offers GMOs, they have not been in the news as prominently as Monsanto. Local farmers have been aggressively sued and many put completely out of business through the enforcement of Monsanto's patents. In the court of public opinion, Monsanto doesn't stand a chance against a small farmer.