Agribusiness and land management are often overlooked sectors for investors as they try to build diversified portfolios across a variety of industries, especially in the small-cap space. Many small-cap investors find themselves overweight in high growth, high volatility stocks in sectors like technology and biotech so a low beta stock with a high yield may provide some much-needed balance. Alico, Inc. (NASDAQ: ALCO) is just such a company that owns and manages citrus groves and land in Florida. The Fort Myers company was founded in 1960 and currently manages about 83,000 acres throughout eight counties in Florida.
The company has a market cap of just $260 million and operates in two business units, Citrus and Land Management & Other Operations. The Citrus unit operates and cultivates fruit that is sold to both the fresh and processed markets. The Land Management & Other Operations segment conducts numerous activities including mining, conservation, livestock grazing, and recreational use. The stock currently yields about 6% and has a price-to-earnings ratio (P/E) of only about 6, so it represents an income opportunity at a more than reasonable valuation.
The state of Florida is one of the fastest-growing areas of the United States, and land there is becoming increasingly valuable so the acreage Alico owns could be a source of future value that could be unlocked. Within the farm products sector, ALCO looks cheap with its P/E of 6 and EV/EBITDA of 5.7 when compared to the industry marks of 14.3 for P/E and 9.2 for EV/EBITDA. Similarly sized industry peers include AppHarvest (NASDAQ: APPH) with an EV/EBITDA of -3.2, Limoneira (NASDAQ: LMNR) with EV/EBITDA of 55.7, and Vital Farms (NASDAQ: VITL) with an EV/EBITDA of 65.5. Especially when its dividend is factored in, Alico looks to be an undervalued hidden gem in the agribusiness space.
Alico is barely followed in the analyst community, with only one firm providing coverage with a Strong Buy rating. The lack of attention from Wall Street may be a contributing factor to the company’s low beta of 0.58. The company is closely held, with about 40% of shares owned by insiders. This is a good indicator that management will continue to run the operations conservatively with a focus on the dividend so, for income-seeking investors, Alico is worth a look. While the company has shown no signs of wanting to get out of the citrus business, it is undeniable that land in the Sunshine State will only get more valuable as people from across the country continue to flock to Florida in large numbers. If the company were ever to sell any land holdings, investors could reap those rewards.
A strong yield, conservative management aligned with shareholder interests, population mobility macrotrends, and low volatility all paint a picture of a stock to put on the radar. Investors who need low tech, low beta exposure to counterbalance their portfolios are good candidates to give Alico a closer look.
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