“Origin Agritech Ltd. (SEED, Nasdaq) produces corn, rice, cotton, and canola seeds for the Chinese market. It has announced significant advances in both development and licensing of genetically modified seeds. One of those announcements gave the stock a spike up at the end of 2009. Investor reaction to the announcement was excessive. SEED is China’s Monsanto (NYSE: MON), but very early in its life cycle. Company revenues are only about US$90 million. That small size, the fragmented nature of the Chinese seed market, the difficulties in establishing a reputable and reliable dealer presence, and the volatility of prices in the past few years have made SEED’s operating results extremely variable, more so than many investors had expected. ... That volatility should be reduced and growth enhanced by the long-term trend in China of moving from micro-farms, tiny, to macro-farms, larger. Larger farm operations will want reliable seed at a profitable price, replacing the volatile buying habits of tiny farms. ... When the stock is undervalued, it should be added to portfolios.”
Ned W. Schmidt, The Agri-Food Value View, 12/10