I recently highlighted the danger of becoming overly enamored with a company's real estate holdings, but that hasn't halted my quest to maintain property exposure through stocks. One such area that I still find intriguing is farmland.
My current portfolio includes a couple of high-quality pink-sheet names that own sizable amounts of farmland. One grows cotton and vegetables and the other produces grapes for its own wines and for sale to others.
Unfortunately, both stocks "trade by appointment," which is another way of saying that they lack the liquidity necessary to mention them here. (We at Real Money don't like to tout "micro-caps.")
However, there are plenty of other ways to get farmland exposure, although some stocks are off the beaten path rather than household names. Here are a few companies that I like:
One name that I've previously written about is Argentina's Cresud, which owns an estimated 2 million acres of farmland among its many assets.
Of course, Cresud faces a couple of issues. First, Argentina hasn't historically been the most business-friendly or best economic environment, although that might be changing under new President Mauricio Macri. Second, did I mention that Cresud is based in volatile Argentina? I've had a position in this name on and off for years (we're currently in an "on" period), and I'm seldom surprised by its volatility.
Farmland Partners (FPI)
FPI, which is a more recent addition to my portfolio, is in the business of acquiring farmland. Launched in 2013 as a REIT, the firm went public in 2014.
As of late January, FPI owned or had 258 farms under contract, for 107,898 acres of total holdings. Farmland Partners focuses on land used to grow a variety of crops, such as corn, soybeans, wheat and rice. The company charges rent to farmers who operate on FPI-owned land.
The stock's performance has been unexciting so far, but the shares currently yield a decent 4.9%. And one of the metrics I use for companies that own land is enterprise value divided by acres. In FPI's case, that works out to just over $2,500 an acre. Whether or not that's impressive is in the eye of the beholder.
Last but not least, I've held Limoneira for many years.
LMNR grows pistachios, olives, lemons, oranges and other citrus fruit on 7,500 acres that the company owns in California and Arizona. Limoneira also develops real estate and owns some California water rights.
Interestingly, this is a former pink-sheet company that listed on the Nasdaq in 2010. Although I'm a long-term holder, I'll admit that the stock's performance has been terrible over the past few years -- with shares down more than 50% since early 2014.
Revenue also fell 3% in 2015 even as the cost of goods sold added 2%. And while Limoneira managed to finish in the black last year, much that stemmed from the partial sale of its stake in food distributor Calavo Growers (CVGW).
Long thought of as an asset play, LMNR has underwhelmed investors recently. But for me, this is a stock that I've put away for my golden years.