“Operation Global Rescue” Stocks — Breakaway Investor

By Travis Johnson, Stock Gumshoe, September 8, 2008

On a day when the faces walking by my house on their way to work at Fannie Mae headquarters are looking a little bit glum and uncertain, let’s stroll over to an entirely different section of the investing neighborhood.

This is the subject line that has been filling up my inbox of late:

“Controversial ‘Relief Fund’ Makes BIG MONEY Payouts to Charitable Americans!”

This is another ad for a newsletter we’ve looked at quite a few times before, but things have changed a little bit. BreakAway investor was for quite a while edited by Andrew Mickey, but apparently a few years of failed teaser stocks (and, I imagine, some weak performance by the newsletter as a whole) has led to a changing of the guard. Christian DeHaemer, who edits or contributes to many other Taipan newsletters (Red Zone profits, Crisis Trader, Material Profits, etc.), is now at the Breakaway Investor helm. Will his picks do any better?

(I don’t actually know anything about why Mickey left, just guessing — he’s still in the business and is now investment strategist for a much smaller organization called Q1 Publishing.)

This time around, the promise of the ad is a bit novel — they tell us that you can do well by doing good. That you can contribute to what they call “Operation Global Rescue” by investing in this “Global Relief Fund” and help feed the world, and also get rich. You don’t have to read between the lines too much to notice that, of course, they just made up the terms “Operation Global Rescue” and “Global Relief Fund” — what they’re talking about is investing in the companies that help modern agriculture run. I guess you can make the argument that these investments will help to feed the hungry if you like, though they do go a bit aboveboard comparing investing in Potash and John Deere to making a charitable contribution.

And they make you feel like you can be “controversial” in making money by doing good — which, of course, conjures up images of big returns (why else would there be a “controversy?”).

If you want to save the world or feed a family, send your money to Heifer Project International or whatever your favorite charity might be … but perhaps you can still make some money with agricultural stocks, and have more money to fuel your generosity. Let’s have a look:

“‘Operation Global Rescue’ Stock #1: Feeding the World!”

Here’s an excerpt from DeHaemer’s spiel:

“If you could only own one stock for the next five years… this would be the one. Kiplinger’s calls this company a “real growth stock”… .

“This company is a leader in agriculture biotechnology. They produce seeds and herbicides …

“According to a survey by Thomson Financial News, their earnings are expected to grow 37% annually over the next three to five years.

“And they can charge a pretty penny for seeds that grow corn that is resistant to pests.

“In fact, in June this company launched a new push to help feed the world by funding wheat and rice research projects, handing out seeds to African farmers and pledging to double corn and soy yields over the next 22 years.”

We get some specifics, too, thankfully — so the Thinkolator needn’t go hungry today.

Net income grew 107% year over year in the last quarter.

Profit margin is 18%.

Trades at a PE of about 30.

Big mutual funds have been adding to their positions.

DeHaemer doesn’t softpedal the promise — he sees 250% gains for this one, and says that you should … “put this company in your portfolio now. It’s the buy of the decade — and you don’t want to miss out!”

So what is it?

Well, as you may well have guessed if you’ve spent any time looking at ag stocks, this is …

Monsanto (MON)

Monsanto is essentially a biotech company that focuses on seeds — they develop genetically engineered seeds that can grow in harsh conditions, or that won’t be affected by their herbicides, or otherwise will help to increase yields, save money, or allow farming in areas that are not particularly suited to it.

In the big picture, I think technology like this is critically important — but there are certainly folks who disagree, some quite vehemently. Just picture the “frankenfood” protests in any country in Europe over the last ten years, there are some places that just don’t want these seeds, or any crops grown with them.

That said, Monsanto is making an awful lot of money, and I can’t imagine that we’ll be able to effectively feed a growing population without more and better genetically engineered crops, though of course there’s always a risk that this gets pushed too far and we all start growing rabbit ears or having our toenails turn green. Personally, I see this as primarily an extension of the hybridization that farmers have been spearheading for hundreds of years, and that my recent ancestors worked on every day on their corn and soybean farms in Illinois. On the other hand, stuff like growth hormones in dairy cattle, which Monsanto was also involved with a few years ago (and may still be, I don’t know), give me the heebie jeebies. Didn’t say I was consistent, just sharing my opinion.

But my personal feelings about “frankenfood” don’t mean much — what’s the investment potential for Monsanto?

Well, DeHaemer is clearly not alone — lots of folks think the promise is huge here. Morningstar pegs the fair value at $145 and thinks you should consider buying at these levels (it’s at $107 before the open today, looks like it will probably open higher than that).

The news has been fairly thick for Monsanto lately, too — they got permission to export their latest “Roundup Ready” Soybeans to China just last week, and they got an upgrade on Friday by Credit Suisse, along with plenty of articles recently on what a value these shares represent (one from from Investopedia here, just to get you started). Kevin Kerr, who has made a name for himself with some great picks in various commodity sectors over the years, also thinks Monsanto is a good bet.

Keep in mind, if it’s this “operation global rescue” stuff that appeals to you, that Monsanto is in the act of actively preventing the most basic farming practice, seed saving. There’s not necessarily anything wrong with that — Monsanto has to protect their intellectual property and patents, and the only way for them to do that is by preventing farmers from making their own seed, so that they can force them to buy seed from the owner of those patents, but it does make them look bad on occasion when they have to sue farming cooperatives. And it does mean that as their technology spreads around the world, it may be tougher to keep a handle on that intellectual property — if you think it’s hard to keep a teenager from uploading a CD to bittorrent, imagine how hard it is to make sure farmers don’t let plants reproduce themselves. I’m not an ag expert — I remember the Llama that my second cousin owned much better than I remember what his corn fields looked like — this is just my personal take on one of the company’s challenges.

If you’re interested in this part of the agricultural space — seeds and herbicides and the basic inputs for agriculture (except fertilizer), there are also a few other places you can look. The closest competitor to Monsanto is Syngenta (SYT), which is growing more slowly and doesn’t have some of the powerhouse products like Monsanto does (Roundup in particular), but is much cheaper and in the same agricultural biotechnology business, or you could also look at a diversified and perhaps more stable company that has a big seed and agricultural protection (read, pesticides and herbicides) business like DuPont (DD), which is relying on its ag business for growth in some ways but is cheaper still (thanks in part to cost pressures in their basic chemicals businesses).

Most ag companies have had some big moves up in the last couple years, but I do like that the seed companies at least rely less a massive price climb than have the raw fertilizer companies, the Potash Corps and Mosaics of the world, and it is nice to have a product that is patent protected, not just a commodity whose price can swing wildly.

And don’t worry, you’ll get the fabulous opportunity to read some Gumshoe chatterboxing about the several other ag companies touted as the investments for this “Global Rescue Fund,” too — I’ll be looking at them soon.

But it’s your money … what do you think of Monsanto?

P.S. I do actually live just a few blocks from the palatial Fannie Mae headquarters … I normally see the employees all come swarming out for lunch in the neighborhood eateries with lanyards around their necks and smiles around their faces. I wonder if the bars will be a little fuller at lunchtime today (not that I would know), and I hope there weren’t as many employees who had their full retirements socked away in FNM stock as there were at Bear Stearns or Enron. I know the news crews are certainly gumming up traffic quite a bit as the stern reporters do their standups in front of the building, I’ll let you know if the circus gets exciting in these parts.

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35 Comments on "“Operation Global Rescue” Stocks — Breakaway Investor"

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Bob
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Bob
September 8, 2008 10:04 am
Herb Walker
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Herb Walker
September 8, 2008 10:25 am

I read recently (I wish I had kept the link) that in the southern U.S. there is a new weed running wild because it is immune to Roundup.

MON could have future problems if nature produces more weeds like that.

A. Nony Mouse
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A. Nony Mouse
September 8, 2008 10:41 am
http://www.reuters.com/article/pressRelease/idUS63085 23- The above is a link to a news release about the patent sharing agreement between Monsanto & Syngenta. RE; Round-up I think I would rather go with Syngenta (SYT) for a couple reasons: 1. For some reason, although the occupy the same ag niche, Syngenta doesn’t have the same Frankenfood rep as Monsanto. This is especially true in Europe, Asia and the Mid-East. 2. Syngenta has done extensive research in mapping the rice genome. Sure there is a growing middle class world-wide but there are a heck of a lot more poor people, to whom rice is the… Read more »
Steve
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Steve
September 8, 2008 11:14 am
As far as Roundup (glyphosate) tolerant and resistant weeds, they will definitely be a problem in the future unless farmers either rotate to other herbicides or tank-mix Roundup with other products. Here’s my theory on why Roundup Ready crops have been banned in Europe: It’s really nothing more than protectionism in the name of food safety, since Monsanto (an American company) was the first to develop herbicide tolerant corn, soybeans and cotton. If one of the huge European crop protection companies (Syngenta, Bayer or BASF) had been first to market, I have a feeling the European Union’s stance might have… Read more »
Tom Beach
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Tom Beach
September 8, 2008 11:15 am
Monsanto is messing with the world’s food supply via genetic manipulation and seed stock monopoly. Their motive is profit. They do not care about our health or that of our enviroment. If they did they would not creat seeds that become plants that can and do destroy bees and invade organic farm fields. They actually sue and take farmer’s lands because their (Monsanto’s) seeds fall off trucks and grow on farms that did not plant them. The farmer did not pay for the priveledge of using Monsanto’s seeds!!. Monsanto is patenting every seed that exists in the U.S. and world… Read more »
ProBhi
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ProBhi
September 8, 2008 11:43 am

Hey Folks!
One important point about Intellectual Property rights for AG biotechs like Monsanto. They have developed a technology called TERMINATOR which actually does not allow farmers to replant the seeds from the current harvest. The seeds are genetically modified to become infertile.
This forces farmers to buy seeds every year. Thers been a big furore in countries like India where similar products have forced farmers to buy from Monsanto.

emmanuel
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emmanuel
September 8, 2008 12:18 pm
In spite of good results Monsanto is sitting on a potential time bomb. There are many questions ethical and others that linger and that the company is pushing under the rug Monsanto and other biotech companies are vulnerable to a problem that will tank their stocks. They are in a race against bad publicity There is a strong consummer movement in Europe and in the US against GMOS and there are independent studies that shows serious problems relating to biotech foods. Monsanto is trying to hush It. I do not want to take that kind of risk. All that shines… Read more »
boband
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boband
September 8, 2008 1:02 pm
Roundup itself is no longer under patent…I believe. There are certainly lots of generic versions. Roundup tolerance is something that is present in nature…many weeds are becoming tolerant to it, or more correctly the use of Roundup is providing selection pressure for glysophate tolerant varieties. This is true of every ag chemical as far as I know. And glysophate is one of the safest and best there is…still. In the “good old days” using atrazine to produce corn was very much more scary than using roundup. Genetically modified crops are probably one of the safest technologies ever invented by man… Read more »
Ginny
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Ginny
September 8, 2008 4:25 pm
Although the FDA and the food industry claim GMO foods are safe, properly tested, and necessary to feed a hungry world, it is just not true! Many consumers mistakenly believe that the FDA “approves” GM foods after rigorous and in-depth, long-term studies. In reality, the agency has absolutely no safety testing requirements. Instead the agency relies on research done by Monsanto itself. Monsanto’s research is designed to avoid finding problems. It’s also easy to understand the FDA’s industry-friendly policy on regulation of GMOs when you consider the cross pollination occurring between FDA regulators and the companies they are supposed to… Read more »
destry
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destry
September 9, 2008 12:19 am

On a more positive note….Even the relatively small list of agriculture companies above, are daunting as to investment choices….
I personally prefer to invest in one company,for example; And in the industry itself, t5houg, in this case; Van Eck Agriculture ETF…A very diverse portfolio of Seed, fertilizer, farm machinery,etc. An excellent long-term hold.
Symbol: (MOO)

David Hathaway
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David Hathaway
September 10, 2008 9:03 pm
1. Colorful language often clouds logic and fact. 2. It is seldom clearly only good or only negative. 3. Look at the history of business. A vicous cycle of different industries placing profit over principle. To naively (sp?) trust industry is dangerous. (Similar to my simple sister-in law who went into a car dealership and said to the salesman who approached her, “I’m here to buy a car please don’t screw me” True story. 4. It is a company by company decision based on what they are doing at this point in time. 5. As long as I do not… Read more »
destry
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destry
September 12, 2008 10:21 pm

I think “Hans”, and “Bob” are going to be my favorite vaudville act…
Anybody who can use the word “mirth”; Seven “Haha’s
and call me a “Thrall”,in two paragraphs,gets big points….
The “dark overlords” was the darlin’ part.
I really like “tomes”, as well.
It makes me proud to be insulted by such educated
lads as yourselves.
…Seven “Haha’s”… I am impressed…

Bob
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Bob
September 16, 2008 5:03 pm

Whoops again.

PS You may wanna stay away from GMO foodstuffs just as a slight precaution that every professional objective observer of the matter has weighed in with a warning that the stuff is unfit for human (and other sentient beings’) consumption.

Andreakw
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Andreakw
September 18, 2008 3:41 am

PS – sorry about the typos – no automatic spell check on this window.
End of rant 🙂

destry
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destry
September 19, 2008 4:45 pm

Bob, I was right….
You’re more fun than a rock fight over an open grave.
All the talking points…Every one.
One little thing…Too few “periods”…Too many
“take-a-breath, commas”. You were hyperventalating.
Are you allowed access to a computer without adult supervision?…Or did you escape?
I apologize…I really like you…It could be though; Because I had a pet squirrel as a kid.

Gravity Switch
Admin
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September 8, 2008 10:32 am
Really good point, Herb — sorry I didn’t mention it. Roundup has been around for something like 30 years, and roundup-resistant weeds are a problem in some areas, and appear to be a cyclical problem generally. Conceptually, it’s not too different from the problems with antibiotic-resistant bacteria like MRSA, after being overexposed to the antibiotic/herbicide for many years, bacteria/weeds that are resistant either develop through mutation, or are given a chance to thrive by the absence of competitors. I don’t know if there’s a point where you can call a winner in the arms race between biotech and nature, but… Read more »
Sally
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Sally
September 8, 2008 11:20 am

I believe HERB might be referring to “Cogon Grass” which has several other names. It has been added to the “Ten Most Noxious Weeds in the World” list!
I have it in my yard after hurricane Ivan sent it to me in 2004. It’s true that NOTHING yet works to kill this weed. A fortune awaits the company who can find a way to kill this!

Gravity Switch
Admin
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September 8, 2008 10:35 am

Bob, that’s an interesting article on more of the dark side of Monsanto, thanks. FYI, I deleted the other link because it wouldn’t load, not an editorial decision.

A. Nony Mouse
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A. Nony Mouse
September 8, 2008 10:43 am

And I don’t know why the link takes you to page not found…but if you do a google search “Monsanto Syngenta patent sharing agreement” it’s there.

Larry
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Larry
September 8, 2008 1:27 pm
Its really a shame to have someone (Beach) put such misleading information on this site when stockgumshoe works so hard at getting the facts right. I’m a scientist, there have been very good studies in the very best independent labs (most in anti-GMO Europe) and the plants absolutely don’t harm bees. There has never been any negative health effects from GMO plants. These plants are not weeds; nor do they invade organic farms any more than non-GMO plants. The reason they get patents for their work is because they are inventions! They take many years, usually over ten, to develop… Read more »
farley 5
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farley 5
September 8, 2008 1:51 pm

Thank you so much for your clarity on this subject. My aunt was the industry leader in making new rose colors and no one had a problem with her GMO flowers. I have a client that raises bees. He does not worry one bit about GMO’s. He is upset whenever the crop duster comes by and does not warn him to cover his hives. BTW – He has lost more bees to bears and the lice than spraying crops.

destry
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destry
September 8, 2008 11:11 pm

To pile in on this would “Guilding the Lilly”
Nice job of “Red Doggin’ “. You two make me proud.

JAY RICHARDS
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JAY RICHARDS
September 8, 2008 11:36 pm

The “weed” is actually a prolific and productive food stock amaranth seed plant, which is considered a staple in some parts of the world…hazardous to cotton harvest machinery due to it’s height and thick rapid growth. Drought resistant.

destry
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destry
September 9, 2008 12:11 am
There is no doubt that great care should be taken in any genetic engineering…However, to imply any “for profit” company would purposely sell harmful, or untested products,that could destroy their reputation as a business, is irresponsible… Man has been doing genetic engineering as long as the existence of any civilization…The potato famine in Ireland was caused by the Irish choosing the wrong potato to cultivate, as opposed the Germans choosing a rot resistant strain… Corn is a more productive crop, as opposed to it’s “Indian corn” ancestor; A product of genetic engineering…Secrecy? Yes…Billions are spent in research…And industrial spying and… Read more »
boband
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boband
September 9, 2008 12:19 pm

Ginny’s response is exactly the sort of fear I talked about in my earlier post. My question is why one would choose to believe the story from the Phillipines….if it were true there would be millions of dead animals all over the southern USA and worldwide. Because BT corn is being used in feed as we speak, and probably in most of the feed supply.

Anyway…if you choose to believe the anti-science sorts of sources you will live in constant fear…and probably suffer healthwise as well as lots of those good old home and folk remedies really are dangerous.

Hans
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Hans
September 9, 2008 7:46 am

“to imply any
“for profit” company would purposely sell harmful, ……products”…sorry I just can’t resist: How about tobacco just as one example?

Andreakw
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Andreakw
September 18, 2008 3:35 am
Firstly – a respectable UK newspaper published an article outlining the fact that scientific chat sites had been infiltrated by PR organisations EMPLOYED by Monsanto with the express purpose of trying to discredit scientists who published anti-gm articles. In fact one such scientist who had published a peer reviewed article in Nature (one of the most prestigious scientific journals in the world) had his peer reviewed article retracted by Nature because of a smear campaign by somone purporting to be a credible scientist in the scientific community. When the “scientist” was traced via the internet/email trail, the origination of the… Read more »
A. Nony Mouse
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A. Nony Mouse
September 9, 2008 11:59 am

I agree with you about MOO. I’m also watching the Rogers Van Eck ETF HAP or Hard asset producers Exchange traded Fund. It includes, Ag, mining,petroleum, water, and alternative energy. It just came out and the volume is very light, and it has some other negatives. Given what’s going on with ETF’s it may not be around in 6 months, but I have put it on my watch & wait list

Bob
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Bob
September 9, 2008 6:57 pm
For anyone interested, there’s a link in the first paragraph of this article to a video called something like “The World According to Monsanto,” which (if they haven’t suppressed it already) will give a fuller and more heartbreaking account of this soul destroying enterprise. Imagine a world the food supply of which is controlled by the machinations of a corporation whose only agenda, aside from profit, is a TOTAL LOCK on the flora and fauna, not of the Greek pastoral poem sort, but of the immediate and urgently necessary eating sort. It will quite literally have everyone in the world,… Read more »
Bob
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Bob
September 9, 2008 7:20 pm
Hahahahahaahha. And that’s just for starters. It could go on for pages and would do nothing to demonstrate the depth of my mirth over the puppets who will do obeisance to their dark overlords and think that there isn’t anyone out there who is capable of pointing out that their argument does nothing to dissuade anyone who can see that those same overlords have various of their private parts hanging in full view without protective garments or coloration. As Hans in a pithy way demonstrates, the sort of reasoning that Destry is capable of shows one of two things: he’s… Read more »
farley 5
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farley 5
September 11, 2008 8:43 am
Follow the MAGIC Three: 1. Pay yourself first. Target would be 10% but that is tough raising a family. 2. Maximize your retirement contribution. You would be surprised to know how many people do not contribute or do not at least do enough to maximize the company match. 3. Contribute monthly payments to your children’s 529 plans. In the begining I could not afford the monthly payments for my two children. However, I did it anyway. Because college payments were going up twice as fast as inflation, I even had to raise the monthly contributions. By putting money away every… Read more »
David Hathaway
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David Hathaway
September 12, 2008 4:03 pm

Farley 5,

You are exactly correct. Wish I had done more of
#2. Am at the point now where I lean on the likes
of you, Travis and a few others to keep a decent
investment productivity. Goal is 15% but current
events are temporarily disrupting this.
David

Bob
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Bob
September 16, 2008 4:59 pm
Ha!!!!!!!!! (With nine, count ’em, nine, exclamation points, just to keep things movin’ along! Whoops, there’s another! Just can’t keep up with myself, LOL.) I in turn must confess to being proud to be put into that classy group of performers called vaudevillians (sorry I got the spelling right and you didn’t, but in keeping with Gumshoe’s admirable policy of transparency, I am forced to admit I hadda look it up). I’m afraid, however,that I’ll never make it up to the level of that class act called the Dick and Dubya Hour of (Illegitimate) State Power, and their follow-up acts,… Read more »
destry
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destry
September 19, 2008 4:24 pm
With deeper thought…I’ll grant you your point. I look on it as more of a “Just because you can do it…Should you?”. And I’ll grant you further that there are greedy types that would rather pay insurance claims for unethical behavior (Or escape accusations, and liability entirely), and line their pockets, at the expense of people whose lives and health do not matter. Or…Scientists falsefying (sp.) research reports, for grants, awards, and rewards. No segment of the world’s population is free of that 10% +or- of various preditors, that make humanity look bad. Some of it is also ignorance, and… Read more »
Bigg Fredd
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Bigg Fredd
December 7, 2010 8:59 am

This is nothing new. If you cross plants A and B to form improved hybrid AB, planting the seeds from AB will be like planting the inferior A and B seeds again. If you want the AB hybrid qualities, you need to start with the crossed hybrid seeds again.

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