Tejon Ranch (TRC) in a nutshell:
If you buy this stock you are buying a company that earns virtually nothing. I earned more last quarter than the company did, I think. But they have assets, or rather asset. 270,000 acres of land 60 miles north of LA right on route 5. It is a little outside of the development sweet spot, but LA real estate is starting to get hot again. I am traveling out there next week to visit six REITS. Different market, but if REITs get hot enough, land values go up.
At $22 a share, you would be buying the land for roughly $1000 an acre. Its worth at least 3 times that to a real estate investor. The stock traded at $50 a share the last time (late 80s) California land was in favor. The company has done nothing since then, until six months ago.
Quick review of what has happened in the last six months.
1. The stock was controlled by three investors, including Times Mirror. In February, Times Mirror said it wanted out, and hired JP Morgan to realize value. The stock jumped from 14 to 17 on this development.
2. In July two big things happened. The company hired a real estate development executive and announced a five year goal of developing the land. That is just huge. AND Times Mirror sold to two highly respected vulture funds - the kind of guys who don't invest in things where they can't double their money in 3 years. They probably paid about $18 a share.
3. The stock hung at 18-19 for two weeks after the announcement then ran to 27 in four days. It has fallen back to 22. In my opinion it is worth in the low 30s. The assets are worth about $60 a share. I figure they have a low tax basis and maybe nothing will happen, so I say the low 30s. I just want to point out that that is pretty conservative.
A Ben Graham value buy in a very rich market. I posted it here first when it was 17 four months ago, and you would have had a chance to cash out at 27 already in this "sleepy asset play". The current price is a screaming buy.
Do your own homework.
Respectfully,
Jim
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