On the agriculture side, Limoneira owns about 5,800 acres of California farmland; including 1,766 used to grow lemons, 1,254 for avocados, and 1,062 for oranges. Total agricultural acreage is the equivalent of nine square miles of land. A sweetener is the fact that the company also owns water rights associated with the land.
If there's anything compelling about Limoneira, it's the assets, not operating results. The company currently trades for 68 times earnings, and 37 times 2013 consensus estimates. From a revenue perspective, the first nine months of 2012 have been good, up 22.6 percent over the same period last year, and we'll see if that trend continues.
If you happen to like avocados, then you might also be interested in Calavo Growers, a company that has close ties to Limoneira. Calavo, founded in 1924 but did not go public until 2001, markets and distributes avocados and associated products.
In 2005, Calavo and Limoneira executed a cross-equity agreement, in which Calavo acquired a 15.1 percent stake in Limoneira, and Limoneira became Calavo's second largest shareholder with a 6.9 percent stake. They continue to hold ownership interests in each other to this day, although Limoneira has somewhat reduced its stake in Calavo over the years.
Other than its stake in Limoneira, Calavo may not be much of an asset play, but it has been putting up some decent numbers. Yesterday, the company announced fourth quarter earnings of 42 cents per share, which exceeded consensus estimates by two cents. Calavo currently trades for about 25 times trailing earnings and 16 times 2013 consensus estimates. The company also yields 2.6 percent, and its annual dividend, currently at 65 cents per share, has been growing; more than tripling over the past ten years.
I've got to admit I am not a big fan of avocados, but that seems to put me in the minority; certainly in our household. I'd venture to say however, that many investors were unaware that they could actually get investment exposure to the strange, green fruit. At least I think it's a fruit.....
I'll explore additional small agriculture plays in future columns.