(B)(N) MON Monsanto Company

Drama. Bedeviled by markets that he doesn’t understand, a well-known asset manager said today that “The market is like a hot air balloon. You’ve got to keep on pumping in hot air to make it go up. The recovery story in the United States is not dead. You’re seeing the economy take a bit of a breather (Reuters, April 4, 2013, TSX dips to three-month low on weak U.S. jobless claims)”.

Well, that observation plays well on the golf course, but it is not something that we can take to the bank. On the other hand, the Monsanto Company of St. Louis, Missouri, has been huffed and puffed at least three times in the last fifteen years – in and out of acquisitions and spin-offs, and the progenitor of controversial products like Agent Orange and aspartame (NutraSweet) which would dismay anyone – but its genetic seed business and global markets are doing well (Reuters, April 3, 2013, Monsanto raises full-year earnings outlook after 2Q profit exceeds Wall Street expectations) and the company entered the Perpetual Bond™ at $80 early last year and is currently trading at $106, well-above the current Risk Price (SF) of $86 (please see Exhibit 1 below).

The expected downside, due to the stock price volatility, is as much as minus ($8.50) per share and we can protect our current price by buying the July put at $105 for $4.75 per share today and partially offsetting the cost of that by selling or shorting the July call at $115 for $1.75; that’s expensive, but for a net cost of $3 per share (3% of the current stock price), we can collect our dividends of $0.375 per share per quarter ($1.50 per year) and be assured of no less than $105 and possibly no more than $115 for the stock during the next several months, at least until the end of the global “planting” season in the Northern hemisphere, and the beginning of the season in the Southern hemisphere where the company has been successfully developing new markets, and possibly some other exciting issues that the company might blow in to, so to speak.

Exhibit 1: (B)(N) MON Monsanto Company – Risk Price Chart

Monsanto Company is a provider of agricultural products for farmers. Its seeds, biotechnology trait products, and herbicides provide farmers with solutions that improve productivity, reduce the costs of farming and produce better foods.

(Please Click on the Chart to make it larger if required.)

For more hope (and seed capital) that is not unfounded, please see our recent Posts, S&P TSX Winners & Losers, April 2013, The Dow Transports, March 2013, or The Wall Street Put, March 2013, or The Risk Adjusted Dow, March 2013, or The Canada Pension Bond, February 2013.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™
“Alpha-smart with 100% Capital Safety and 100% Liquidity”
Guaranteed
With No Fees and No Loads on Capital

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Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.