Monsanto: Time to cash in on your profits!

About the company

Monsanto Company is a publicly traded American multinational agrochemical and agricultural biotechnology corporation. It is headquartered in Creve Coeur, Greater St. Louis, Missouri. Monsanto is a leading producer of genetically engineered seed and Roundup, a glyphosate-based herbicide.

Reason for SELL recommendation and termination of coverage

Given the recent rally in equity markets and in Monsanto shares, we changed our stance from a BUY to a SELL.

We are monitoring closely Monsanto and believe it is time to crystalise the profits on this share.

Price of the stock is at $122.20, price target of takeover by Bayer is $128. That’s a further 5% upside.

Although we continue to maintain our arguments that the deal will go through, we don’t think it makes sense to continue taking on this risk for 5%.

If the deal doesn’t go through we would have missed an opportunity.

Bayer’s bid for Monsanto

Bayer aims to pull off the biggest, most transformative deal of its 152-year history in 2017, as it attempts to meld its own pesticides with Monsanto’s seeds and herbicides.

Bayer signalled that it remains confident about completing its $66 billion takeover of Monsanto by the end of the year amid concern it may struggle to win over regulators.

Conclusion on the equity market

We suggest selling Monsanto from portfolios. We suggest putting the cash to work in other companies with a more attractive risk/reward potential.

The world economy seems to be recovering steadily. Expectations of economic growth often accompanied by higher interest rate expectations are having a twofold impact on equity valuations. The twin effect; an expected earnings increase from higher economic growth and the expected rotation from fixed income to equities as a result of higher interest rates, is dramatic.