Monsanto the Environmentalist

“In the world I follow, I know that the biggest threat to endangered wild animals is land encroachment. GMO’s are more efficient and require less land for higher crop yields. That allows more land to be untouched and to remain in their natural state. If everything was grown organically and naturally, the Amazon Jungle, the forests of Asia and certainly the plains of Africa would be under a lot more pressure.”


To market to market to buy a fat pig. Greece! The name that is spoken regularly in our office not because of the debt situation but because Sasha is landing there sometime this morning. It will be interesting to hear what the views are from the average man on the street. For the rest of the world there was hope that the Greek saga would end last night. Not to be the case, talks reached a deadlock and will resume again today. The way I see it, the 30th June is still 5 days away, which to me means that a resolution won’t be reached until then.

Moving closer to home, Cell C and Facebook through internet.org announced that they are teaming up to help bring free internet to South Africans. What is internet.org by Facebook? Here is what their web page says, “Internet.org is a Facebook-led initiative bringing together technology leaders, nonprofits and local communities to connect the two thirds of the world that doesn’t have internet access.” I think having access to the internet will do more to level the playing field than anything else; which will empower more people and lift more people out of poverty. Google has a similar project, loon for all. Project loon is more focused on bringing internet to hard to reach areas than making the internet free but even having to pay a fee for access to internet in a rural area is worth it. The internet connection on the balloons is LTE which makes it a faster speed than most parts of South Africa.


Load shedding has almost become a “normal” part of daily life for most of us; this article from Moneyweb highlights how dire things are at Eskom – Even 25% fee increase won’t lift Eskom from junk, Moody’s says. There is no doubt that it is going to take many years to fix the power supply issues and that the South African tax payer is going to be the one paying for it, either through taxes or through increased electricity tariffs. As we chatted about in yesterdays message, the increasing costs of electricity is great for the alternate energy sector.

I am not a fan of public enterprises because I think it is easy to spend someone else’s money. It does not demand efficiency or innovation because your existence does not depend on it. The time is here where the money flow is stopping and there is a need to have private companies involved in the production of electricity. I hope that the increased involvement of the private sector and competition of the alternate energy sector coupled with the financial problems at Eskom, result in a more efficient organisation. Only time will tell.


Company Corner

On the company front, there was a Renewal of Cautionary Announcement- Possible Infant Nutritionals Business Acquisition from Aspen. I wonder how big the deal will be and if it will result in a rights issue?

Monsanto is a controversial company. I often see posts on Facebook with deformed mice who have been fed food grown from genetically modified seeds. I won’t pretend to know the science behind it all but I certainly know where I stand on the issue. I see myself as a conservation conscious individual. In the world I follow, I know that the biggest threat to endangered wild animals is land encroachment. GMO’s are more efficient and require less land for higher crop yields. That allows more land to be untouched and to remain in their natural state. If everything was grown organically and naturally, the Amazon Jungle, the forests of Asia and certainly the plains of Africa would be under a lot more pressure. Today we feed 7.3 billion people using the same amount of land as we did 40 years ago to feed 4 billion people.

Monsanto released results yesterday which were solid but were negatively received by the market. Here goes.

“Net sales for the fiscal year 2015 third quarter increased over the prior year’s third quarter to $4.6 billion, with gross profit for the quarter also increasing over the prior year period to $2.7 billion. For the first nine months, net sales were $12.6 billion and gross profit $7.2 billion.

The company’s fiscal year 2015 third-quarter earnings per share (EPS) was $2.39 on an ongoing and as-reported basis, compared to an EPS of $1.62 on an ongoing basis and as-reported basis in the same quarter last year. EPS for the first nine months of fiscal year 2015 was $5.75 on an ongoing and $5.80 on an as-reported basis, compared with an EPS of $5.43 on an ongoing and $5.45 on an as-reported basis in the same quarter last year.”

The company has volatile earnings as it relies on volatile crop yields and prices. Just like any commodity based supplier. The negative share price reaction came from a weaker guidance and an announcement to stop the share buy back program in order to pursue a massive $45bn acquisition of Syngenta. Syngenta dominate the global pesticide market, Read more about the deal here Monsanto Claims Accelerated Innovation by Combining with Syngenta.

The company has good margins and offers a vital service in an industry that will never go away. In fact, as populations grow and people get wealthier, more food will be consumed. It is certainly a growing industry. If you can stomach the earnings swings as crop prices change then Monsanto is still a great long term investment.


Linkfest, lap it up

The latest South African to become a SirFormer Xstrata CEO Mick Davis now Sir Mick. He now runs X2 resources who were reportedly interested in the assets that now form South32.

Considering that many people use social media while watching TV, why not bring TV to social media? HBO and Facebook have teamed up to do just that – HBO and Facebook are teaming up to stream Ballers and The Brink. Given the number of eye balls Facebook has access to, this may be a long term way of circumventing piracy by removing the need to pirate a show. HBO could get revenue through the adverts placed on Facebook and through product placement in the series and Facebook get more eye balls for longer.

Say what you will about Carl Icahn, he has a talent for making money – Carl Icahn just closed the book on one of the greatest trades we’ve seen in years. His Netflix stake was bought at $58 a share and he sold the last of it yesterday with the share price around $700. Not bad for 3 years worth of work.

To add a bit of culture to our livesThe next Guggenheim could be a charred timber lighthouse. Am I the only one who wasn’t sure if this was a real image or a computer generated one?


Image courtesy of Moreau Kusunoki Architectes/Guggenheim

Here is a look at CEO pay in comparison to the market cap of the company and how well the stock did over the year – Performance Pay Here is the 2014 image, thanks to the WSJ. The graph is interactive and goes back to 2010, so go have a look.


Home again, home again, jiggety-jog. Markets are up today with our three healthcare related stocks all up over 1%. The Rand is a bit stronger against the Dollar currently trading at R/$ 12.12, it seems that the new normal is for the Rand to be above and around the R12 level now.


Sent to you by the Vestacters, Sasha, Michael, Byron and Paul.

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