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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: LauA who wrote (9581)	1/9/2000 1:35:00 PM
From: Wright Sullivan	Read Replies (1) \| Respond to of 79163

Lau- You have proven one of my points wrong. I said that TPL owns some of the worst land in this country. It sounds like Nevada Land & Resource has them beat by half. TPL's land came to them in the exact same fashion: A checkerboard grant (each checker is 640 acres) made in the 1870's to the Texas & Pacific Railroad. In 1998, TPL made approximately $5,500,000 from oil & gas royalties, grazing leases, easements, and other income. In addition to this, they sold $5,000,000 worth of land and used the proceeds to buy back shares and fund the 1% dividend. This is their standard operating procedure. (TPL market cap is roughly $100 million). Even if these numbers fluctuate, there's at least some income here. As I said, this is not a growth play. But one can look at TPL's 10 or 20 year chart and get some idea of whether it is low or high relative to its past valuation. Not much has changed with TPL during that period, except that they have sold some land and bought back some shares (3.5%/year). I don't know if $82/acre is cheap or not in West Texas. But at least most of TPL's income comes from oil & gas (less than 10% is from grazing leases). So there's a bit more to TPL than bad land at $82/acre. I find it interesting that all of these land companies and REIT's are moving down in lockstep, yet I can't find a lot of correlation between the fundamentals of, JOE and TPL, for example. In theory, TPL should move somewhat with the price of oil, and should decline if raw land prices are declining. But I don't see raw land prices dropping through the floor where I live (S.C.), and the price of oil is not low. Basically, land prices appear to be holding steady while TPL and its kin are dropping. JOE and CTO are much more interesting as long-term holdings, in addition to the improvements of short-term rationalization. With both of these, there is the opportunity for substantial growth as Florida grows. The coming retirement of the baby boomers adds an element of inevitability, though we may be talking about a 15 year timeframe here. Most people today have trouble with a 15 month timeframe. Your point with respect to Burns Brothers clearly highlights the danger here. With many of these land plays, there isn't much of an operating business to provide long term returns. Crap at half the going rate is still crap, and will continue to be crap 10 years from now. But at some price it is a value play, which is what I am after, along with a margin of safety which is no longer present in some of my other investments. There may be better ways to achieve this result, but a small TPL position looks like a safe side bet to me now. I appreciate your perspective.