Why Does Everyone Hate Monsanto?

By Brian Orelli, Ph.D.
December 15, 2009 | Comments (7)

While the article paints Monsanto as a rather mean company -- the agriculture giant even felt the need to issue a press release to respond -- I'm not sure investors should care. Perhaps they should even be smiling a little. The shrewd business practices are exactly what you'd want from a good investment.

Monsanto has become the giant that it is by licensing its gene traits to other seed companies. Is it ruthless in those negotiations? Absolutely, but that's what we'd expect from a company protecting its intellectual property. No one is forcing small seed companies to license the traits. They want to because Monsanto has useful traits like Roundup Ready that farmers want. Better products cost more.

The Associated Press and DuPont (NYSE: DD) take issue with Monsanto using its licenses to limit competitors' traits that can be combined with Monsanto's traits. But again, it's Monsanto's intellectual property. The company has swapped licenses and combined traits with Dow Chemical (NYSE: DOW) and Syngenta (NYSE: SYT) when it's to its advantage. We don't force Pfizer (NYSE: PFE) and Merck (NYSE: MRK) to combine their cholesterol-lowering drugs, why would Monsanto want to combine traits if it wasn't in the best interest of the company?

Of course, one man's shrewd business practices are another man's antitrust violations. The Department of Justice is investigating the company and investors should factor that into their valuation. Still, it's not like Netscape took out Microsoft (Nasdaq: MSFT) even with regulators help.

You're free to hate Monsanto and refuse to invest in the company -- socially responsible investing and all. But you're missing a dominant company with a nice moat. The kind Buffett loves.

Socially responsible definitely isn't one of the 10 reasons Jim Mueller likes this stock.