Seeking Potential Bargains From the Recent Shakeout

 | Aug 29, 2011 | 2:00 PM EDT  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

cresy

,

IRSA

Please note, this story has been updated to reflect a change in Cresud's land holdings.

Last week's earthquake and the mandatory evacuation from the New Jersey shore this week, thanks to Hurricane Irene, make two fat tail events in two weeks, neither of which had anything to do with the whims of Mr. Market. The earthquake speaks for itself in terms of rarity, but we have never faced a mandatory evacuation from the shore. Now it's back to business with the hope that things will calm down a bit from here.

The volatility that the markets have experienced in recent weeks is continuing to shake loose some potential bargains. I use the word potential very loosely because it still feels like there's more volatility to come. What I might see as a bargain today or tomorrow, may get even cheaper next week or next month. In fact, I've done a lot of research and watching recently, but not much buying. It's not business as usual in my view, and far too many storm clouds still loom on the horizon, which will keep the markets in roller coaster mode for quite some time.

One name I'm watching very closely is the Argentine farming giant Cresud (CRESY). I owned this name previously and closed my position in late November in the $19 range. The stock had run up nicely to that point, and when I sold, I intended to re-establish a position later. Since then, shares are down about 28%, to the $13.50 range, very near a 52 week low.

Cresud, whose risks as an Argentine company are obvious, given the economic instability and inflationary environment of the region, is an asset-rich company. As of the latest fiscal year-end, the company owned 24 farms comprising more than 473,000 hectares (the equivalent of 1.167 million acres, about 1.5 times the size of Rhode Island), more than 71000 beef cattle and 7,600 dairy cows.

In addition, the company owns significant stakes in other publicly traded companies, including 57.49% of the Argentine real estate company IRSA Investments and Representations (IRS), whose current market cap is $639 million. Cresud also owns nearly 36% of the Brazilian land company Brasilagro, which trades on the Sao Paolo exchange and is also on the pink sheets in the U.S., whose current market cap is approximately $360 million. Together, Cresud's stake in these two companies is worth nearly $500 million, while the company's current market cap is $670 million. Of course, large stakes in publicly traded companies may deserve to be discounted to a certain extent, but ownership in these entities adds to Cresud's allure in my view.

I view agricultural land as an asset class in and of itself, and while I'd prefer exposure here in the U.S., Cresud presents an interesting opportunity for exposure to non-U.S. farmland. One other note of caution: Corporate governance is quite different in Argentina than in the U.S., as evidenced by one of the proxy statements I received while a shareholder; it is well worth reviewing.

 

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.