On Tuesday, I took initial positions in two names, both of which I intend to add to over time. The first is Florida citrus name Alico Inc. ALCO, which owns 103,000 acres in Florida. About 46,000 of those acres, which cover an area of nearly 72 square miles, are citrus acres.
I owned Alico several years ago but moved on. It has been on my radar ever since, and frankly has done little over the years. Alico shares currently trade at about the same level they did 20 years ago. There has been a good deal of bad news for Florida orange groves lately, and 2021 looks like a down year, with the crop expected to drop by nearly 20%. But that news is likely priced in, and agriculture land is a place that I want to be and I am building exposure.
Alico's current enterprise value (or EV, which is market cap less cash plus debt) is $378 million. I am fond of a homegrown calculation I use for companies that own land (EV/acres), and in this case it equates to about $3,770 based on the total of 103,000 acres. If you base it solely on the 46,000 orange grove acres and assume the rest of the land is worthless, you get $8,217. ALCO doubled its quarterly dividend to 18 cents back in December and currently yields 2.4%.
I also initiated a position in Sprott Physical Silver Trust (PSLV), which has been on my radar for the past year. As of Tuesday, each share represents 0.3598 ounces of silver, and PSLV is backed by physical silver. PSLV unit holders can redeem units for physical silver on a monthly basis, subject to minimum requirements. For instance, redemptions are done on the last day of the month and must be for the equivalent of at least 10 London Good Delivery bars (these mammoth bars weigh between 750 and 1,100 troy ounces each). I will never have a position nearly big enough to take delivery, but I like exposure to silver in this crazy spend-everything and national -debt-be-damned mode that our government is engaged in.
While physical silver still trades at a fairly large premium to the spot price, PSLV trades at a 0.42% discount. A $1,000 bag of junk silver (715 ounces) will cost you just over $23,000, or $32.19 an ounce, which represents a 33% premium to the spot price.
Owning PSLV is not the same as holding physical silver in your hand, but it's a lot cheaper and could be part of a precious metals strategy.
