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

To: 249443 who wrote (12631)	6/11/2001 8:16:51 PM
From: Broken_Clock	Read Replies (1) \| Respond to of 78596

I wonder what he sees in those picks? They've all had huge runs over the past 2 years. TRC looks to be the best of the bunch.

To: 249443 who wrote (12631)	6/12/2001 1:06:08 AM
From: Paul Senior	Respond to of 78596

Opinion on buying TRC (Tejon): You've asked if anyone here follows TRC. Given that this is one of the few value threads on SI; and that many people here in their research endeavors have come to know Mr Whitman, his record, his book, and his funds; and that a few posters here live in Southern California-- the answer must of course be, that there are people here who indeed follow TRC. ---------------- I myself have been wrong on the stock many, many times. Won't stop me from giving an opinion now though -g- . There are three significant issues with TRC,imo, and they don't relate to the determination of intrinsic value of the stock. The first issue is will the intrinsic assets be realized? The second is how long must an investor wait for a payoff? And the third is how should an investor play this stock now? A current concern apparently is related to the electricity issue facing California. The way TRC might work with Calpine to get generating facilities, installing them, etc. I say that that is not necessarily the only problem. I'm not understanding why water isn't a significant issue. For example we have Newhall Land (NHL - also a big landholder developer in Southern Cal.) taking a drubbing when the Cal. Public Utilities denied them a request to develop some of their properties that they were extremely close to starting. An unexpected surprise to investors. (NHL subsequently exited these properties, and the stock recovered.) While Mr. Whitman says TRC does have water, that, imo, is to be determined. And I realize that those here who follow water stocks might have better information -- but that NHL issue really was an unexpected surprise to the market, so why can't TRC be subject to a similar negative surprise in future as well? I'll just go ahead and say I don't know when the intrinsic value of this stock will be realized. But unless there's more positive development news forthcoming, investors had better be prepared for a wait. You say 2003 to realize maximize value. I don't know what that means, but for now, this stock trades on Mr. Whitman's recommendation of the stock, media writeups that say the stock is undervalued, and importantly, on the market upward evaluation of California land companies in general (e.g. NHL is at a high also.) In any case, my opinion is that these land plays take much longer to work out than expected, and investors had better be prepared to wait for a payoff. On the one hand we have companies (e.g. ALCO most recently) where the payoff is very sudden. (that is, not following stepwise as the properties are developed and sold). That is one reason to buy the stock now and be in it. OTOH, imo, given that there's still a possibility, if not likelihood, that negative announcements might also drop Tejon stock, my suggestion is that potential investors remain on the sidelines for a better price than the current 28+. Mr. Whitman cleaved his large position from the LA Times(?) at under market, about 13 if I recall, and he was buying at 18 or higher -- and now also at 24 someone said. But since Mr. Whitman's big buy and the media write up of it, there've been at least several times to buy TRC at under 22, even under 20. Furthermore, TRC is not the only land developer selling under intrinsic value and working to decrease that disparity. There are at least several others. In spite of what Mr. Whitman says ("diversification is a surrogate for knowledge, control and/or price consciousness"), I say that in this area (land developers), for most investors, the risk/reward profile favors owning a package of these companies. After all, TRC is subject to changing state and local zoning regulations, supply/demand in a questionable economy, and geographic peculiarities (like earthquakes). All stuff that can surprise even the most knowledgeable TRC investor. Anyone buying Tejon ought to consider buying it as part of a package of such companies. As examples only, CTO (Mr. Buffett's - or his rep's - pick in Florida) and CDX (in Northern California), both of which I have, and JOE in Florida (which I do not), and/or perhaps development REITs or real estate service companies. jmo, Paul Senior