Earlier this week I focused on real estate and my fascination with it as a value investor. The piece ended with a reference to a name I once owned that has again hit my radar, but not for one of the customary reasons.
Florida-based agriculture name Alico (ALCO) owns more than 116,000 acres in Florida, which is the equivalent of 182 square miles. The bulk of the land, about 70,000 acres, is ranch land (the company's Water Resources and Other Operations business), but the potential gem here is 45,000 acres of citrus groves.
The stock has not done much lately; it has been relatively flat for the last three-and-a-half years and is down about 30% over the past five years. Last week, an event occurred that might ultimately push shares lower, and if it unfolds as I suspect it might, I will be waiting to take a new position.
Last week, Alico announced that its largest shareholder, 734 Investors, which owned 3.17 million shares, or about 42.5% of shares outstanding, is dissolving and has distributed those shares to its members on a pro rata basis. What's unclear is whether any of those shares will be sold, putting pressure on ALCO's stock price.
Therein lays the potential opportunity: It certainly would not take much in the way of sales by former 734 Investors to tank Alico's stock, which has average volume of less than 10,000 shares per day. In my view, this would be a potentially temporary situation, depressing an asset-rich stock due to an oversupply of shares for sale and not because of other fundamental reasons.
I've seen this happen before when other investment vehicles have distributed shares to their members, who in turn sold them, temporarily depressing the price. It all depends on whether any former 734 Investors members will be selling, and time will tell. With year-end approaching after a monster year for stocks, the planets will be aligning for investors to offset gains with losses, and given ALCO's recent history, not many investors have made money on the stock over the past several years.
Finally, I want to resurrect a homegrown metric I use when reviewing companies that own land. It is Enterprise Value/Acres. I use it as a reference point, and not necessarily to make decisions when evaluating land-owning companies. After all, it is simply a dollar value per acre, ignoring all company assets except for land, but does not help discern the quality of the land in question.
For Alico, the metric equates to about $3,600 per acre (enterprise value of $418.5 million divided by 116,000 acres). For Tejon Ranch (TRC) , which I referenced in Wednesday's piece, it equates to $1,658, and for JG Boswell (BWEL) , it's about $5,900, using only the company's California land and excluding its Australian holdings, which are in the process of being sold.