Why Your Portfolio Should Be Pest-Ridden
Sep 9th 2013 7:43PM
Updated Sep 9th 2013 7:44PM
As the Earth warms and humans help in transporting pests, their damaging effects on crops grows. A new study reports that pests are moving toward the poles at a rate of 16 miles per decade, much faster than previously measured at 3.8 miles per decade in 2003. These pests destroy between 10% and 16% of crops, and at a time when there are more mouths to feed than ever, there's a large opportunity to help protect our food from blight.
Who can benefit from more bugs? There are many companies that are working on this issue.
We can make them stronger
Take Monsanto's Bacillus thuringiensis-carrying corn and cotton products. Modifying these plants to carry Bt, which is toxic to many insects, reduces the amount of pest maintenance a farmer needs to do later on in the season. It's also a much more efficient and targeted way of using the toxin as opposed to spraying a pesticide.
Nature finds a way, however, and the bollworm developed a resistance to the first-generation Bt-carrying cotton crops around the world. Monsanto, keeping ahead of resistance, released a second-generation Bt cotton plant, and is working on a third. The growth in research and development is evident:
And stronger still
Competitor Syngenta offers plenty of pest-protected plants as well. Sold under brand names like CruiserMaxx, this seed treatment "protects against damaging chewing and sucking insect pests," along with protection against fungi. A less well-known and smaller player is FMC Corporation , which offers a range of pesticides, fungicides, and herbicides, along with chemicals used in food and industrial applications.
All three of these companies offer profit margins above 10% and are priced at a slight premium to the market at P/E ratios a little above 20. But with their importance to protecting our food and material crops and a fairly guaranteed and steady business for the foreseeable future, it may be worth paying for the quality these companies represent.
One risk to such companies is the regulation cropping up to label genetically modified crops and further control pesticide use. Consumer preference is trending toward organic products grown without the use of many chemicals. However, if pests are uncontrollable through organic means, and if these companies continue to innovate products that can increase crop yields and fight common crop ailments, then the benefits of utilizing such products may outweigh any harm from ignoring a fickle consumer trend.
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The article Why Your Portfolio Should Be Pest-Ridden originally appeared on Fool.com.Fool contributor Dan Newman has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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