Should Monsanto (MON) Stock Be Part Of Your Portfolio Now?

On Jun 8, 2016, Zacks Investment Research upgraded Monsanto Company (NYSE:MON) to a Zacks Rank #3 (Hold) from a Zacks Rank #4 (Sell). Going by the Zacks model, Zacks Rank #3 companies are likely to perform in line with the broader market.

Why the Upgrade?

In view of the food price inflation and ever increasing population, farmers consistently strive to meet the rising demand through increased yield. Thus, the demand for Monsanto’s products, which serve to increase crop productivity, is also on the rise. The company boasts a high brand status in the global modified seeds market backed by its superior technology and unique agro products.

Moreover, Monsanto is on track to improve its liquidity through disciplined cash management. The company aims to record free cash flow of $1.6–$1.8 billion for fiscal 2016. The company intends to utilize its increased liquidity for productive purposes, such as enhancing shareholders’ value, establishing new projects and Greenfield business expansion plans, in the near future.

However, the stock is exposed to headwinds like intense competition that raises the risk of market share loss for the company. In addition, appreciation of the U.S. dollar is likely to hurt the company’s international revenues and margins. Moreover, Monsanto conducts its trade in the global agricultural industry that is subjected to cyclical fluctuations owing to climatic conditions. Thus, its share price is directly affected by the fluctuations in the global agro industry.

Stocks to Consider

Some better-ranked stocks in the industry include First Majestic Silver Corp. (NYSE:AG) , Antofagasta (LON:ANTO) plc (OTC:ANFGY) and BHP Billiton (LON:BLT) Limited (NYSE:BHP) . All the three companies presently hold a Zacks Rank #2 (Buy).

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