Pay more, get less. That's generally not a very good business model, and it's the reason Monsanto
Investors have become increasingly worried about Monsanto's SmartStax corn, which combines eight different traits to protect against bugs and make them resistant to herbicides used to kill weeds. Monsato sells SmartStax, which was developed with Dow Chemical
So far that theory isn't holding up. With about 10% of the corn harvested, the SmartStax is actually trailing the production of the older seeds.
Let's take a step back before we declare SmartStax a bust and run out and buy competitors DuPont
And one season may not be enough to see the results. In a good year, the SmartStax might not live up to the hype, but it's kind of like buying crop insurance in case the bugs do get to the crops.
Will farmers buy my argument, which I'm guessing is the same one Monsanto will make? In the long run, they probably will, but Monsanto may need to discount the seeds for a few seasons until farmers are convinced SmartStax is worth the money.
Considering that Monsanto is counting on SmartStax to be a growth driver now that RoundUp is all dried up, a cut in revenue is going to hurt. Long-term investors will likely be OK, but anyone looking for a quick buck shouldn't expect Monsanto to turn around quickly.
Jeff Fischer decided one stock wasn't enough. He recommended an ETF in today's buy opportunity.
Monsanto is a Motley Fool Inside Value pick. Syngenta is a Motley Fool Global Gains selection. Motley Fool Optionshas recommended a synthetic long position on Monsanto. Try any of our Foolish newsletter services free for 30 days.
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.