By Gabriel Wisdom, author of Wisdom on Value Investing: How to Profit on Fallen Angels (John Wiley & Sons).

With a rapidly growing world population, new seed technologies that provide for better crop yields will likely be critical to providing the world with sufficient food supply.

Monsanto's

(MON)

seeds and genomics segment, 56% of 2008 sales, is well positioned to benefit from the global population boom.

The company generated a return on shareholders equity of 20%-plus in 2008 while operating profit margins have been in excess of 20% for the last several years. At $75, shares are down approximately 48% from their 2008 high. Our three-year price target is $125.

Monsanto has been engineering plants that can fix their own nitrogen and are resistant to drought. Robert Fraley, chief technology officer for Monsanto, is convinced that genetic modification will lead to new varieties of plants with higher yields, reduced fertilizer needs, and drought tolerance.

"Natural gas is a raw material for nitrogen fertilizers, and farmers need lots of fossil-fuel-based fertilizers and lots of fossil-fuel-based pesticides." says Michael Pollan, University of California, Berkeley. (The Global Food Crisis by Joel K. Bourne Jr.,

National Geographic

).

Tthe world has approximately 6.7 billion people, and now food and energy resources are getting scarcer. It's clear that some new methods for meeting the world's food and energy needs must be developed as soon as possible.

If research accumulated by

National Geographic

is accurate, we're going to need a whole lot more grain to feed livestock. As long as there is plenty of water and fertilizer, with little competition from insects or weeds, food production is sustainable.for now. We will be looking for stocks of companies that can help provide what our rapidly growing world needs, now and in our more crowded future. Companies like Monsanto that can provide solutions to enhance food production should generate predictable revenue growth for years to come...

The power of population is indefinitely greater than the power in the earth to produce subsistence for man.

--

Thomas R. Malthus, Essay on the Principle of Population (1798)

At the turn of the 19th century, Thomas Malthus observed that human population increases at a geometric rate, doubling every 25 years or so, while agricultural production increases arithmetically...a much slower rate.

From a base of around 300 million in the year A.D. 1, by 1800, the world's estimated population reached 1 billion people. According the the Population Reference Bureau in Washington, D.C., "if a country's population begins with 1 million and grows at a steady 3% annually, it will add 30,000 persons the first year, almost 31,000 the second year, and 40,000 by the 10th year. At a 3% growth rate, its doubling time -- or the number of years it takes to double in size -- is 23 years. (The doubling time for a population can be roughly determined by dividing the current growth rate into the number "69." Therefore, 69/3=23 years. Of course, if a population's growth rate does not remain at this rate, the projected doubling time would need to be recalculated.)"

Analysts may argue about secular bear markets or excess capacity in commodities, but the fact remains that every day, another 200,000 people are added to the world's rapidly growing population base. The dramatic spike in food costs last year may have been a wake-up call for the planet.

Since 2005, we've had food riots in nearly two dozen countries as the price of corn and wheat tripled, and the price of rice climbed five-fold. Agricultural productivity growth is too low to meet population growth, and Monsanto has technology to provide some of the solutions. Monsanto appears to be a Fallen Angel, poised to rise again.

At the time of publication, Wisdom was long the Fallen Angels Fund (FAVLX) , of which he is a manager and shareholder. Monsanto makes up about 2% of that fund.

Gabriel Wisdom is co-founder of American Money Management, LLC and one of the nation's enduring radio personalities. Beginning in 1968 as an underground FM disc jockey, his commentaries have appeared in syndication, on CBS Radio and NPR. He's managed over a billion dollars for wealthy investors since 1983, is co-manager of two public mutual funds, and host of a daily program carried on affiliates of The Business Talk Radio Network. He serves on several boards including The Harvard Business School Alumni Club of San Diego, and is a Private Pilot.