HAWAII and CALIFORNIA
Matson has served Hawaii for over 100 years and operates about 182 voyages per year--75% more than its top competitor, CSX. Matson's business, while not officially a monopoly, is like owning a tollbooth in the Pacific Ocean.
This is a pretty good business, netting nearly $100 million in cash profits in a good year.
Not many people know this, but Matson isn't an independent company. It's a subsidiary of a long-established Hawaiian holding company founded in 1870. This holding company also owns Hawaiian Commercial & Sugar Company. You'd probably recognize this company's sugar. It comes in the brown packets with a label that says, "Sugar in the Raw." It's served in fancy coffee bars. This sugar operation is profitable too, netting close to $10 million a year.
It's no surprise then that the stock market values this holding company, which owns both the sugar and the shipping operations, for close to $1 billion. That's about 10 good years worth of earnings. That makes the holding company a cheap stock. It also pays a reliable, 4% dividend.
------------------SOUTHERN CALIFORNIA
Interstate-5, the major north-south artery on the west coast, borders the property for 16 miles. More than 60,000 cars a day pass through this property. It's within a 5-hour drive of every major city in California and even closer to Las Vegas. Already IKEA, the giant Swedish home furnishings retailer, has built a 1,460-acre warehouse complex here to house its North American Distribution Center.
Second, this land is also the perfect setting for residential development. In fact, there's a new town springing up right now, called Centennial, complete with ranch estates and luxury homes as well as top-shelf golf courses...
And there's a third reason this land is so valuable: Water.
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five more companies around the United States with situations similar to the two I've just described:
COMPANY #1 OWNS 14,500 ACRES IN THE DAYTONA BEACH area of Volusia County, purchased in the early 1900s when the company operated as a Navy supply store. Property is listed on the company's books at $125 per acre. The real current value is about $29,369 per acre. One piece of land sold recently for more than $200,000 an acre.
COMPANY #2 BEGAN OPERATIONS IN 1936 as a holding company for the DuPont trust. As Business Week recently reported, this company "is the largest landholder in Florida with more than 40 miles of coastline along the Gulf of Mexico, which it is starting to develop." All told, the company owns more than 1 million acres. Book value of this land is $900 per acre. The real current value is more like $20,500 per acre on average. A parcel sold recently for $2.7 million an acre.
COMPANY #3 IS RUN BY ONE OF THE WEALTHIEST FAMILIES in Florida (which controls more than 50%. This operation owns more than 142,000 acres in Collier, Hendry, Lee and Polk Counties, Florida. Listed on the books at $119 per acre, it's really worth an average of $14,700 per acre.
COMPANY #4 WAS FOUNDED IN 1883, when a father left his sons 143,000 acres of California ranchland. On the books the land is listed at about $2,700 per acre. In the real world, it's worth a minimum of about $13,000 per acre.
COMPANY #5 WAS CREATED IN THE 1888 bankruptcy of the Texas & Pacific Railway to sell 3.5 million acres of land. Today it remains the largest private landowner in Texas, with more than one million acres, valued on the books at about $12 an acre. If it was all sold today, it would be worth at least 50 times that price, about $500 an acre.
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There are two more things to like about this investment strategy...
1) THERE'S NO DANGER OF COOKING THE BOOKS. An acre of land is a real, tangible asset. You can see it. You can touch it. You can even stand on it. An acre is 43,560 square feet, no matter where you go. There's no way to fudge it. There are no earnings to hide or expenses to fake. And you can put a real value on this land by using the two methods that have been used for hundreds of years to value real estate: 1) tax records and 2) sales of similar properties.
2) THE LONG-TERM PROJECTIONS FOR REAL ESTATE ARE OUTSTANDING. Rent levels and housing prices have doubled in the past 20 years, between 1980 and 2000. The same thing happened during the prior 20 years, between 1960 and 1980. And the same thing happened between 1940 and 1960.
We have every reason to believe the same thing will happen over the next two decades. Look at the facts...
By 2010, according to recent estimates by the U.S. Census Bureau, the U.S. population (currently 280 million) could increase 11%, to 311 million. By 2020, the population could be up 26%, to about 354 million. At the same time, according to Gary W. Eldred PhD (Stanford University), the United States' gross domestic product (all of the things we produce as a country) is poised to grow at an average rate of 3-5% per year.
Because of the increase in GDP and population size, rent levels and housing prices will more than double - just as they have since the early 1980s. Just as they did between 1960 and the early 1980s. And just as they did between 1940 and 1960.
I meet people all the time who say: "I should have bought property years ago. I've missed out." Well, regret never made anyone rich. As was the case in 1940, 1960, and 1980, now is a great time to invest in good real estate. And when you consider that you can buy it at 19th-century prices...well...to me, that's too good to pass up.
But you don't need numbers or statistics to identify this truth.
Look at where you live now. Is real estate more expensive than it was 15 years ago? Most likely. 25 years ago? Sure. 200 years ago? Definitely. The story is the same virtually all over the world. |
