Early Thursday evening we headed to a local restaurant for takeout (our small daily effort to keep these places in business). The restaurant is located in a small strip mall, and it was strange to see the anchor store Kohl's devoid of customers. The parking lot was empty, but what really got to me was a local policeman, who stopped and asked me what I was doing there, then sped off when he realized I was patronizing that restaurant. That was an odd feeling, almost as if I was breaking some curfew.
Speaking of odd feelings, the difficult part in sifting through the wreckage of a 29% drop in the S&P 500 in the past month or so (and corresponding 37% and 39% drops in the Russell 2000 and Russell Microcap indices, respectively) is having the conviction to step in and buy. I am seeing prices in some names I could not have imagined, but it is against a backdrop that I never could have imagined, either.
As I peruse the list of names that have been absolutely crushed, I am drawn toward a few sectors, including agriculture. I never thought I'd see Argentine farming giant Cresud (CRESY) trading in the mid-$2 range; and yes, that's the one I named as my top pick for 2020. Shares are down 46% over the past month, perhaps not surprising given overall market declines and because this one is in Argentina, not exactly the bastion of capitalism or a solid economy.
Last November I thought Florida citrus and land name Alico (ALCO) , one that I've owned in the past, might drop due to the distribution of 42.5% of the shares outstanding from its largest shareholder, which dissolved and distributed those shares to its investors. The theory was that at least some of those shareholders would sell, depressing ALCO's price. Well, the price has fallen, but not for the reason I thought it would. Shares fell about 38% from $37 in mid-February to $23 this past Monday before rebounding to $27 on Thursday.
The list goes on. California citrus name Limoneira (LMNR) (another I've owned previously) is down about 40% and is below 2008-2009 levels. Meanwhile, the very mysterious California farming giant JG Boswell (BWEL) is off 28% over the past month to levels also not seen since early 2009, putting its market cap at just over $400 million and its yield at 3.5%.
The difficult part is putting capital to work in an environment where our economy is basically shutdown, duration unknown. You've got to think that agriculture will come out on the other side just fine, but you must be willing to see new positions potentially crushed with each new day, new virus case numbers, and new restrictions on life as we knew it.
I've been trying to remember just exactly what it was that got me back to buying in 2009; part of it was no doubt the length of the market drawdown, part of it getting to the point where I believed names were stupid cheap. While I can't check either box at this point, the list of names on my radar is definitely growing.
