I've been a holder and proponent of Argentine farming giant Cresud (CRESY - commentary - Trade Now) for several years now. The company is asset-rich, owning 1.28 million acres (2,000 square miles) of farming land, more than 100,000 head of beef cattle, not to mention a 55% interest in publicly traded Argentine land company IRSA (IRS) and a 19% stake in BrasilAgro. Shares are up about a third since my last column devoted to Cresud, and have more than doubled since bottoming in March.
Cresud (CRESY) -- One-year chart
Source: Yahoo! Finance
Cresud is quite a package of assets, yet the company's market cap is just over $600 million and enterprise value is just under $1 billion. The 55% stake in IRSA alone is worth $275 million, while the 19% stake in BrasilAgro is worth another $40 million based on current market values. It's hard to say what 2,000 square miles of farming land is worth, let alone a large herd of cattle, but suffice it to say this company is still undervalued. Cresud has become even more attractive as a way to gain exposure to South America given neighboring Brazil's recent decision to impose a tax on foreign investors.
While I still like Cresud and continue to hold shares, I'm also aware of the risks associated with owning a company denominated in a foreign currency, with different accounting standards than those we use in the good old USA. It's no picnic perusing Cresud's financials, and I'm keenly aware that I'm taking some of the information on faith. Furthermore, Argentina's economy has been prone to hyperinflation and an overreaching government, adding to the riskiness of such a position.
Investing Why Even Bears Should Look for Stocks 10/30/2009 12:13 PM EDT If the market corrects, I want to be ready with a list of the stocks I want to buy.
At the time of publication, Heller was long CRESY.
Jonathan Heller, CFA, is president of KEJ Financial Advisors, a fee-only financial planning he recently launched. Jon spent 17 years at Bloomberg Financial Markets in various roles, from 1989 until 2005. He ran Bloomberg's Equity Fundamental Research Department from 1994 until 1998, when he assumed responsibility for Bloomberg's Equity Data Research Department. In 2001, he joined Bloomberg's Publishing group as senior markets editor and writer for Bloomberg Personal Finance Magazine, and an associate editor and contributor for Bloomberg Markets Magazine. In 2005, he joined SEI Investments as director of investment communications within SEI's Investment Management Unit.
Jon is also the founder of the Cheap Stocks Web site, a site dedicated to deep-value investing. He has an undergraduate degree from Grove City College and an MBA from Rider University, where he has also served on the adjunct faculty; he is also a CFA charter holder.
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