Matthew Waterman
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Matthew Waterman in Brand Power,

I Understand How Monsanto Makes So Much Money Now

So my family just moved into our very first house together, and I'm learning very quickly about all the little chores you have to do as a homeowner to keep the place looking nice. In addition, I've taken up a new gardening hobby, and I learned this as a consequence:

  • Pulling out weeds with your hands sucks.

and

  • RoundUp weed killer is expensive.

I was at Costco (COST) last night, check this out. Just a half gallon of concentrate will set you back almost $60:

However, after fighting with numerous heads of wild lettuce that are sprouting in my front lawn, I can totally see why people pay so much for it. And I'm thinking that right about now I could really use some Monsanto (MON) RoundUp ready grass seeds.

Now, to be fair, that concentrate makes a lot of formula, 42 gallons according to the label. You can also buy a 2 gallon premix there, and that will run you $20. In my opinion, totally worth it. I used to look at the income statement for this company, and I've known for years that they were making money hand over fist, and so that's why I'm a shareholder. But experiencing firsthand what creates the consumer demand for RoundUp glyphosate is an eye-opening experience. 

The public focuses way too much on Monsanto's GMO business. RoundUp is where they're really raking it in. I am long shares. The company is trading just a little above $87 today, a multiple of ~22x trailing earnings. I expect their multi-decade history of profitability and dividend payments, (currently yielding 2.5%)  to continue for a good, long time.