Speaker 1 (00:00):
Hi everyone. This is Tim Melvin, and I’m back once again with a better way to, well, now, if you’ve paid any attention or spent any time in grocery stores lately, you know that since the pandemic began last year, food prices are pretty much gone straight up. It’s the first time we’ve had this level of inflation in well, over 20 years. It’s been a bit of a shock to some people. I know I went grocery shopping the other day had to run down and I usually, I like to do a little chef salad thing for lunch. So I grabbed, you know, some of my prepared salad and that stuff had gone up in price by about 40% in like a week folks. And then the little
Speaker 2 (00:45):
Diced hand cubes that I buy to put in there, they have more, more than
Speaker 1 (00:49):
Doubled during the pandemic and that’s poor prices have shot right through the roof. So it’s been kind of ugly. It’s been a little bit hard to deal with. I mean, if you’re on a fixed fixed income, I’m struggling to deal with this food. You’ve had to cut back on some stuff. Now, fortunately, I haven’t been in that position, but my grocery budget has still swelled quite a bit. And it’s, it’s everything. It’s poor. It’s chicken, it’s ham, it’s vegetables, it’s fruit. Pretty much everything has moved steadily higher in price. Now here’s what I think is going to be the good news. Most of this folks is supply chain issues. Remember last March, we shut this thing down hard. Most of the U S economy, none of them to say most, but a substantial portion of demand for virtually everything went down. A lot of the processing and packing plants were closed because they had problems dealing with COVID in the tight confines in which folks had to work. So they were offline for a little while. So the economy’s back up, we’ve gotten it up to, you know, we got it back. It’s about 30 miles an hour. Let’s say if last fall, now we’re screaming at 200 miles an hour. And trying to stay at that level is very difficult. Look, we don’t have enough
Speaker 2 (02:03):
Truck drivers right now. We don’t have enough containers.
Speaker 1 (02:07):
Those big metal boxes that you ship stuff in demand came online so fast that globally, virtually every container was leased and take co was contracted for for some time. So stuff has set on the docks because there’s nothing, there’s no boxes to put it in. There were
Speaker 2 (02:26):
Like two week delays getting into
Speaker 1 (02:28):
The pool. Court’s in Los Angeles and long beach Califia that has
Speaker 2 (02:33):
Abated somewhat, but it’s still like, as
Speaker 1 (02:35):
I know, a two to three day delay to get in offload your stuff and get back out to sea. So it’s all supply chain oriented at this point. As far as we can tell, now that will work its way through the system. Demand’s going to level off slowly but surely. You’ll get the warehouses staffed up. There’s going to have to be some supply chain corrections. We’ve talked about that. We’re going to talk about it a lot more because it is actually a massive investment opportunity down the line. The supply chain is going to get remade. There will be stuff on the shelves. The warehouses will be full and prices will start to pull back and we’ll get some sense of normal food pricing. As long as wage inflation, which we’ve talked about does not rear its ugly head in a, in a huge fashion.
Speaker 1 (03:23):
Now, you know, I’m not real happy about food inflation, okay? Because the price of coffee, right, we drink a lot of coffee in this house has gone up 40% because now there we’ve got some weather issues in Brazil on top of supply chain issues that have driven coffee prices higher and they may go higher still. You know, I’m really worried or watched price score very carefully because corn continues to go up. Bourbon’s going to go up and that could be serious. Anyway, none of us like food inflation guys, it’s no fun. Look, there’s two things we can do. We can sit around, we can whine about it. We can worry about it. We can fret about it. Or we can find some ways to make money from food companies. It just, maybe our profits will put us in a position where we don’t have to worry too much about a little bit of fruit.
Speaker 1 (04:14):
I’ll give you two ideas today. And the third to keep in mind. The first company is company it’s based real close to here. That’s a LICO land. Dissembles Elco, Alico owns a con of land down here. Matter of fact, they just added onto their land holdings. They’re now the largest citrus grower in Florida. They grow oranges and in some other crops and their biggest customer, 87, 80 7% of their production goes to Tropicana. The rest goes to a private label brands and get a grocery store, bring some orange juice. And now they have been strategically selling land down here in Southwest Florida. I don’t know if y’all heard about it, but all of a sudden during a pandemic, a lot of people decided to Florida was where they wanted to live. And the developers down here are just putting up developments on every square inch of land. They can find their paint, outrageous prices for land
Speaker 2 (05:09):
And Alico has been up quite well. I’m going to sell them some of their land holdings
Speaker 1 (05:14):
Now, or we’d go has right now, 49,000 acres of citrus crops. And they’ve planted about one and a half million new trees over the last year or two. Those will come online in a couple of years, start, you know, grow up fruit. So they’re not going to sell all their land. That land I think is pretty much committed. They’re going to stay in the citrus business, but they have another 35,000 acres that currently is leased for a cattle grazing hunting. They’re going to aggregate mine on some of the some of the land that land is going to be available for sale, but developer wants to come along and pay a stupid price. I think Alico is going to go ahead and sell it to them at that price. Now, these guys have been around down here in Southwest Florida for a long time.
Speaker 1 (05:58):
They’re pretty smart guys. They know the land, they know the business. They know, you know, this is a great time to sell. They’ve been through the Florida boom bust cycle before. So I expect them to make a very intelligent lawn sale, you know, land sales and continue to grow the citrus business. So what’s really interesting about this company is for years Alico was just this quiet, sleepy little company. They didn’t do any promotion. There was no real analyst coverage. All of a sudden these guys are at every conference and they’re doing the presentations that got the CEO and the CFO out talking to wall street, talking to the public, chatting up the stock. They just raised the dividend by the way. And this is going to attract some interest in the stocks. They just raised the dividend 178% guys. This stock now yields over 5%.
Speaker 1 (06:51):
So you can actually put them on money into this and collect income off of it. If you need income, that compares pretty well to the like less than 2%. You can get in most treasury bonds or bank investments, maybe even less than 1%, depending on when you unlock the money up. So this is a fantastic business and it’s the next six to 12 months. Great, because they are going to have better margins from the higher food prices are going to dramatically improve their profit margins because remember the stuff they’re selling today, you know, that those trees were planted several years ago, not any big increase in their cost to get this stuff into the markets. There’s three things that you can do as a company to reward your shareholders to return capital. You can pay a dividend check, you can buy back stock check.
Speaker 1 (07:43):
They are definitely buying back stock. They did a tender offer, not too long ago for big Tsongas back and you can repay debt and they’re doing a great job there. They’ve reduced their debt over the last five or six years by about two thirds. So they’re kind of hitting on all cylinders. They’re paying a huge dividend. They’ve got 35,000 more acres that they could potentially sell at top dog. So Alico, it’s trading in the mid twenties. I think that the stock is probably worth 50% more than it’s currently trading for right now. And they have outstanding growth potential. They’re going to generate a lot of cash flow, both from selling citrus and from selling land that should drive the stock a lot higher over the next few years. Now, let me give you one other stock that you might want to stick into your portfolio lemon area. The symbol, there is LMN har if I’m not mistaken, they grow lemons, avocados, oranges, tangelos, grapefruits, pistachios, even some wine grapes, but it is mostly lemons. So they have 14,500 acres of land. They have a packing operation, and this
Speaker 2 (08:51):
Is kind of a cool story because farming
Speaker 1 (08:54):
Is a very fragmented business, especially citrus farming. When you look at farms just get my numbers right here. 65% of all farmers are over 65 years old, 87% of farms are family. And in many instances, their kids do not want to continue in the family. But yeah, farming is not the easiest business in the world. So
Speaker 2 (09:19):
There’s a lot of mom and pop operations
Speaker 1 (09:21):
Out there that are looking to sell. Luminary is looking to buy. We had nine acquisitions in the past six years to add to their inventory of land. And they’re going to continue to make smart acquisitions to grow this business.
Speaker 2 (09:36):
Now, the packing
Speaker 1 (09:37):
House, they completely redid their packinghouse operations. It’s only running at about. Now. I’m going to say 65% of capacity. They’re not just packing their own lemons to ship to the market. They’re packing for third parties as well. And the third party contract business has gone up by about 25% over the last year. These guys, this is fantastic business, have nice slug of the lemon market. They’ve got about 6% of the U S avocado market about 1% of oranges. They also have a commercial real estate project that they’re doing. It’s just contracted with Lenara and KB homes to build the first 586 units of what will eventually be a 1500 unit housing subdivision in California. They projecting millions of dollars of cashflow off of that. As you imagine, one other hidden gem here, they have 28,000 acre feet of water rights in California.
Speaker 1 (10:39):
That is ridiculously valuable. And it’s going to get more valuable as time goes by racist sales of water rights have been at $28,600 per acre foot guys. The water rights alone are probably worth twice the current stock price if they were to decide to sell the water rights. But that would be kind of silly since they’re going to need them to growth here, CRO the fruits, but there’s a great collection assets. It’s dramatically undervalued. I think you’re probably over time looking at a three to four bagger here, giving you the type of profits that could put you a little better position to not worry so much about food inflation. Generally guys, I’m Tim Melvin, thanks for spending some time with me today. And that’s our better way to wealth.
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