Please ensure Javascript is enabled for purposes of website accessibility

Can Monsanto Go Higher?

By Tim Beyers – Updated Apr 6, 2017 at 11:02AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Take a closer look at the agribusiness giant's insider action.

Is Monsanto (NYSE: MON) headed higher, or lower? That's the question we ask when we evaluate insider buying and selling. We ask because the way that executives spend their paychecks often reflects what they think of their companies' prospects.

Of course, not all buys are equal. According to two decades' worth of research from Dr. H. Nejat Seyhun, compiled in his book Investment Intelligence from Insider Trading, buying is most predictive when it (a) comes from the CEO or other top-level executive, and (b) comes in bulk. Seyhun found that buys between 10,000 and 100,000 shares were the most informative.

How do Monsanto's managers measure up against Seyhun's benchmarks over the past year? See for yourself:

Insider Rating Bullish: Buying near recent levels and higher, and in greater bulk than equivalent sales.
Business Description A global provider of agricultural products for farmers.
Recent Price $54.12
CAPS Stars (out of 5) ****
Percentage of Shares Owned by Insiders 0.38%
Net Buying (Selling)* $3.36 million
Last Buyer (% Increase) Hugh Grant, Chairman, President, CEO
37,500 shares at $52.06 apiece on July 13, 2010
(Increased direct holdings by 9%.)
Last Seller (% Decrease) Steven Mizell, Exec. VP of Human Resources
600 shares at $52.24 apiece on Oct. 12, 2010
(Reduced direct holdings by 2%.)
Competitors DuPont (NYSE: DD)
Martek Biosciences (Nasdaq: MATK)
Origin Agritech (Nasdaq: SEED)

Sources: Form 4 Oracle, Capital IQ, and Motley Fool CAPS. (Data current as of Oct. 14.)
*Open market sales and purchases only.

What we're tracking here, and why
Insider buying data can be confusing. Here, I'm concentrating only on buying and selling conducted in the open market. With most of these transactions, insiders control the timing. Other times, they're buying or selling under the purview of a 10b5-1 plan. Either way, they're buying and selling their personal holdings.

These personal holdings matter the most -- they're the shares executives hold for investment, rather than compensation. Employee stock options are different; they're compensatory in the purest sense. I've stripped out options-related buying and selling from the calculations you see above.

The Foolish view: bullish
What's the role of genetically altered superfood in a society that's going organic, and allowing the likes of Whole Foods (Nasdaq: WFMI) to grow revenue and by 12% annually over the past three years? Honestly, I'm not sure. I'll admit my bias to organics up front; our eldest son suffers from celiac disease and a wide range of severe food allergies.

But there's more than genetic engineering at play when it comes to Monsanto's image. The company has been cooperating with a Justice Department investigation into its competitive practices, even as the underlying business continues to perform well.

"Basically if you want the highest crop yield possible you have to use their seeds," wrote All-Star investor turtle286 in August, when the stock was trading for 8% more than it is today. "While farmers hate them for that, unless you're willing to chance disease and crop loss they have a guaranteed source of revenue. Priced this low I really can't see much downside."

Executives would appear to agree with this Fool's bullish thesis. In July, CEO Hugh Grant bought 37,500 shares at prices not far removed from today's. By comparison, the insider sellers haven't sold much. Considering Monsanto's competitive position in an industry that's basic to sustaining human life, there's really no reason to.

Do you agree? Disagree? Log into Motley Fool CAPS today and tell us how you would rate American Capital. You can also add the stock to your watchlist.

And if you want me to take a Foolish peek at the insider action of your favorite stock, email me here or use the comments box below. I'll write this column as often as you, our readers, demand.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

Whole Foods is a Motley Fool Stock Advisor selection. Monsanto is a former Motley Fool Inside Value pick. Motley Fool Options has recommended a synthetic long position in Monsanto. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy has its eye on you.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

E. I. du Pont de Nemours and Company Stock Quote
E. I. du Pont de Nemours and Company
DD
Whole Foods Market, Inc. Stock Quote
Whole Foods Market, Inc.
WFM
Monsanto Company Stock Quote
Monsanto Company
MON
Origin Agritech Limited Stock Quote
Origin Agritech Limited
SEED
$8.79 (-8.01%) $0.77

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.