I always like reading Dan Ferris’ stuff — he does the cranky loner act so well I can only assume that it’s real, and the latest ad for his Extreme Value newsletter is no different. This newsletter is slotted in as the “deep value” letter at Stansberry & Associates, and he has often recommended either solid blue chips and megacaps or underappreciated “discount to net asset value” stocks in the past.
Today, he throws out a good grouchy spiel all about how lots of Wall Street brokers subscribe to his newsletter, and then turn around and give the opposite advice to their brokerage clients — including some great statements as we go through the letter: “Trends are for Idiots” and “‘Hot’ is for Suckers” and “80% of Stocks are Trash.” Maybe I just like reading his stuff because deep down, I agree with most of it. There’s something reassuring about value investing that you just don’t get from technical analysis or trend following — though of course, you also often have to be really patient … and right.
And then he eventually gets into teases of two stocks — both of which I’ve written about before.
The first one is an old favorite of his (well, old meaning he teased it starting a year or so ago) — here’s the pitch, in case you’re late to that particular party:
“Recently, I took a helicopter ride to a remote hilltop in western Newfoundland… to visit a company I believe could return 2,800% or more.
“I was traveling with 3 of the world’s most talented mineral-exploration geologists and two of the best mining analysts in the business.
“Once clear of the helicopter… we had barely walked 10 feet when all six of us stopped, bent over, and picked up the first rock we saw. There it was…
“Gold… visible to the naked eye.
“You see, I was at a gold mine – run by a little mining firm with so much “extreme value” ($194 million, by my estimate), early investors could make a killing.
“I put on coveralls, steel-toed rubber boots, and a mining helmet with lamp… and descended straight into a giant hole in the ground, 20 feet high at the entrance… to see the gold deposits in person.
“Again, to me – this is the only way to make real money in stocks. You have to get to know the executives… scientists… miners… engineers… and anyone else who’s involved in key money-making decisions.
“For example, on the plane ride back from Labrador, I sat next to the firm’s CEO, and had a detailed conversation with him.
“Bottom-line: I urge you to look into this opportunity immediately. As I wrote in my research report: “If this doesn’t qualify as extreme value, nothing does.”
“Based on what I’ve learned, I expect this stock could return 28 times your money, at least. At that rate – a $5,000 stake right now (while it’s still cheap) could easily make you $46,600 a year… for the next 3 years.
“The last time I found a mining stock like this, ROY, we saw a 239% gain.”
So this sounds like it must be our old friend Altius Minerals, a stock I’ve written about a few times both here and on the Irregulars site, and which I still own and would like to buy more of (though now, since I’m writing about it again, I’ll have to wait at least three more days — might not be a bad thing, since recent interest has driven the shares up substantially and I’m kind of hoping they recede to the background again and get a bit cheaper). Ferris initially touted Altius in February of last year, when it was in the neighborhood of $5, as a “prospect generator.” The more recent teaser of his touting Altius is the one that focused on this trip of his to “Newfoundland’s Golden Mountain” and the sighting of visible gold — that particular pitch started back in November, with the shares a bit over $7, and has been repeated. If you happen to be a paid member of the Irregulars, you can see my additional Altius comments on the members site here.
I’ve written about this one enough times that I don’t wish to repeat myself, but Altius holds significant land holdings and mineral rights mostly in the far eastern provinces of Canada (Newfoundland, Labrador), and they generally try to explore their holdings, delineate resources, and then get a joint venture partner to put up most of the cash for drilling and developing a potential mine. In exchange, Altius gets some negotiated royalty and/or junior ownership position to allow them to profit from any eventual success at that potential mine, without having to take any additional risk or invest in the mine development.
It seems to me that they’re trying to slowly and carefully build the next Franco-Nevada, building up a diverse future revenue stream from iron, nickel, gold, uranium and other mining operations. Right now their biggest assets are a royalty on the huge Voisey’s Bay mine, and a big pile of cash and RGLD shares that they got in exchange for their opportunistic investment in International Royalty (ROY) before RGLD won the bidding war for that company. Most of their potential “royalty streams” and joint ventures are many years away from being “monetized” as properties are explored and mines are developed. For a while, the stock traded at a discount to the value of their readily ascertained cash and liquid investments, but it now arguably trades at a small premium — partly because of extra attention from folks like Ferris and many other, more vocal investment pundits, and partly because some of their joint venture projects, including a big new iron ore development, are moving forward nicely, so more investors are willing to pay more than their “cash on the books” value for the company.
So that first “extreme stock” seems almost certain to be Altius Minerals, which many of you know and which, not to repeat myself, I like quite a bit. Ticker is ALS in Toronto, ATUSF on the pink sheets.
And Ferris throws in a second tease in the ad as well:
“How to Always Make Money
“I’ve come across a company that owns over half a million acres of land in Florida – bought decades ago for, in many cases, JUST $2 an acre…
“The last time I found a situation like this – the sugarcane fields in Maui I told you about – my readers saw a small fortune. This time, I expect you could see 3 times your money… beginning just weeks from now, on May 23, 2010.
“You see, on that date… in less than 2 months… the United States will open its first international airport built in 16 years.
“And after months of research – I’ve discovered this little-known Florida company owns every inch of land beneath it. (Even better, this land is right in the middle of one of the largest concentrations of military personnel in the U.S.!)
“Bottom-line: Beginning May 23rd – the stock could begin a 100%+ climb… as the airport and all its traffic drives up the ‘extreme’ value of the land. “
Well, Florida real estate is not quite the same frightening contrarian investment that it was a year or so ago, but it still gives people the heebie jeebies — so perhaps this stock is still a value? From those clues, it seems quite certain that he’s teasing St. Joe (JOE), a long-time value investing favorite.
And I don’t think I’ve every written about a Ferris teaser for JOE, but I suspect he’s probably been on this one for a long time as well — like the other “land bank” stocks this one is a prime value investor favorite thanks to the fact that, like many companies with similar assets, it values the land on its books at a price far lower than it would be worth to a buyer today (in many cases, the value is their initial purchase cost, often from many decades ago). St. Joe owns a huge swath of land — including a lot of beachfront — mostly in Northwest Florida (they own about 580,000 acres, and about 40,000 of those are “entitled” and ready for subdivision and development — much of the rest is wilderness or timberland). Those landholdings are largely a relic of its days as a timber company, and their current business is in managing a pipeline of real estate projects that make this land more valuable — gradually creating subdivisions, neighborhoods, and even towns in the panhandle. The airport is opening this Spring, after a long wait and several court battles from environmental groups, and JOE is heavily invested in making sure the airport “works” — there was an article in the NY Times a few weeks ago about that. They also have a deal in place with CB Richard Ellis to sell 1,000 acres near the airport for commercial real estate development.
Will JOE make you rich? Hard to say, but the airport opening is definitely a very high profile catalyst, and there is certainly real value in the landholdings — and it’s hard to overstate how high the potential could be for their asset values if (and this is an IF) the airport succeeds in drawing a lot more visitors to the area, which would lead to development of more resorts, and more buyers of second homes or retirement homes, which will lead to more businesses being built to serve those people, and therefore to more folks moving into the area for those jobs, etc. etc. Still, since they’re committed to real estate development and to effectively building towns from scratch in this area, the risks are certainly higher than if they were just sitting on their land, waiting for someone to buy it at a premium.
If you’re interested in this kind of idea, there are several other stocks that are often mentioned in the same breath with St. Joe — there’s Consolidated Tomoka (CTO), a much smaller land bank on the East Coast of Florida (and in some other Southeastern states) that’s also developing and leasing land; Tejon Ranch (TRC), which is slowly moving forward on developing its massive land holdings (about 270,000 acres) between Bakersfield and Los Angeles, CA; and Alexander and Baldwin (ALEX), which is operationally primarily a Jones Act shipper transporting goods between the US mainland and Hawaii, but which also owns massive acreage on the islands, primarily old plantations that are primed for “someday” development.
There are others, I’m sure (feel free to throw out your favorites), but what most of them have in common are longstanding timber or agriculture holdings in rural areas, of which portions are expected to become more valuable as exurban centers or new towns someday. JOE has the rare pleasure of an immediate catalyst that might do something to the shares, though the real impact of the airport will take years, and you can argue that some of the environmental agreements Tejon Ranch has made recently also create a “catalyst” for new development to move forward more smoothly, though it’s still California. I do own one timber REIT that’s somewhat related to this, Rayonier (RYN), which has been trying to develop some of their timber lands near the Florida/Georgia coast into “higher and better use” developments, but that one’s getting quite pricey (I’ve held it for many years and enjoy the compounding, but I don’t know that I’d add to my position right now).
So if you’ve got a favorite undervalued landowner, toss out the name with a comment below — or, of course, feel free to comment on any of the above, or on other “value” stocks or whatever else strikes your fancy. If you’ve subscribed to Extreme Value, do your fellow investors a favor by clicking here and reviewing it for us today — or if you’re curious, you can see the reviews from other subscribers here (there are only a few, but they’re generally positive). Thanks!
Full disclosure: As noted above, I own shares of Altius Minerals and Rayonier. I also have orders in place for additional Altius shares that could theoretically be triggered in the coming days if the stock drops precipitously, but otherwise I will not trade in any stock mentioned above or alter my existing Altius trade orders for at least three days.
How do you make sense of it all?I check my net worth and my portfolio (combined from several different brokerage accounts) using Personal Capital at least once a week, it's free and brilliantly organized.
Personal Capital has great tools for tracking spending (they can cut your spending by 15%), but what I love most is their automated financial dashboard -- it will look at all your assets and debts, tally up your asset allocation, project where you'll be at retirement, and suggest ways to manage risk or improve returns. It's free, I think their free tools are great, and I think it's worth checking out -- you can do so here.