Shares of Argentine farming and land name Cresud (CRESY) are continuing their recent tear, up 33% since my last piece on the company, 44% over the past month, 55% year-to date, and trading close to a 52-week, and 2 ½ year high.
The company's recent earnings release certainly helped, but in addition, markets may be re-valuing some of the potentially cheaper agriculture names, as war rages on in Ukraine. Recent volume has been higher too; Thursday's was about four times the daily average.
This company will take you on a wild ride, as it has each time I've had a position.
If you are not familiar with CRESY, it owns an interesting array of assets, albeit in a risky, and inflationary part of the world. The company manages (owns and leases) a portfolio of 880,000 hectares (the equivalent of 2.17 million acres, or 3,400 square miles, larger than Delaware and Rhode Island combined) in Argentina (71%), Brazil (20%), Paraguay (8%) and Bolivia (1%).
About 650,000 acres are farmland (60% owned) where it grows soybeans, corn, sugarcanes, and other crops. There's an additional 418,000 acres (88% owned) devoted to livestock. The remaining acreage, about 1.1 million, is "reserve", and "potential productive" land.
CRESY owns large stakes in two publicly traded companies -- 39.4% of regional (Brazil, Bolivia, and Paraguay) farmland company BrasilAgro (LND) , a $675 million market cap company, and 53.7% of diversified real estate company IRSA (IRS) , which has a $310 million market cap. IRS owns an array of shopping malls (15), office buildings (7) and hotels (3), and other development projects, as well as a 30% stake in Argentine bank Banco Hipotecario (which trades on the Buenos Aires exchange). CRESY does carry considerable debt of about $400 million (net of cash), but that is down from $437 million in 2019.
The company does not garner a great deal of coverage, but for this value investor, from time to time when it has appeared to be cheap enough, it has been a rewarding foray into a risky world.
The first time I owned CRESY several years ago, I wanted it to be a long-term buy and hold, but it has not fit that mold. Headquartered in a country where political influence and government control hampers free markets, and inflation runs rampant, it is naturally going to trade at a discount in U.S. markets. Can you imagine the potential value of a US based company, owning that much U.S. farmland?
What a trading history; the stock traded above $21 in 2018, and by the onset of the pandemic was trading in the mid-$2 range. On Thursday it closed at $7.31.
Welcome to the wild west of investing, not for those with a weak stomach.
