The Plot Thickens For Two Small Agriculture Names

NEW YORK ( TheStreet) -- Two small agriculture stocks that I've covered in columns over the past few weeks have been quietly making meaningful moves since those pieces ran. I've got to admit this is a bit out the ordinary for a value investor; where stories typically take months or years to play out, and where following such value related stocks can sometimes be about as interesting as watching the grass grow or paint dry.

Not so this past week for ( Betting on Farmland ) Alico ( ALCO), which owns 130,800 Florida acres, primarily devoted to citrus, sugarcane and cattle production. On Friday, the company's top shareholder, Atlantic Blue Group, said it will sell its 50.5% stake in the company to private investment company 734 Agriculture, in partnership with Arlon Group. The purchase price for the majority stake in Alico is $137.8 million, or a seemingly disappointing $37 a share. Alico shares closed at $43 the day before the announcement, and the news sent shares down 11% on Friday. Yesterday, Alico closed at $38.36. ALCO Chart ALCO data by YCharts

It was no surprise that Atlantic Blue wanted out of Alico, those intentions had been made clear quite a while ago. The sale price, however, was a bit of a surprise, at least on the surface. However, it is not uncommon for large, stagnant majority stakes in publicly traded companies to be sold at a discount to smaller stakes. I've seen research that suggests discounts can be in the 30% to 35% range. Applying a 35% discount to 734 Agriculture's purchase price implies a $53 price for Alico shares. What happens from here should be interesting, but I believe that it's possible that Alico will ultimately be taken private.

The other company, Argentine farming giant Cresud ( CRESY), has also had an interesting couple of weeks. Shares rose more than 31% in the past two weeks, since my column ran on Oct. 8. That move occurred with no specific company news, but volume that has been above the normal average.

One potential reason the stock is rallying is because of what is happening politically in Argentina. News that President Cristina Fernandez Kirchner is not in good health, and speculation that her ruling Victory Front coalition may lose the majority in the upcoming election may be driving Cresud higher. Kirchner and company have not been friendly to business, and have put forth several anti-free market policies. These include the nationalization of the oil and gas industry, and the implementation of price controls designed to stem inflation, both of which are anti-business. The prospect of end of her reign might bode well for the Argentine markets. Argentine land company IRSA (Inversiones y Representaciones Sociedad Anonima), which is 64.5% owned by Cresud, has also made a nice move the past two weeks, and is up 29% during that period.

This is a very fluid situation; Argentina's legislative elections will be held Sunday. While I am enjoying the run-up in Cresud, investing in an environment where election results may make or break an investment outcome is downright unnerving. But that's par for the course when you deploy capital in Argentina. CRESY Chart CRESY data by YCharts

At the time of publication the author is long ALCO, CRESY.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Jonathan Heller, CFA, is president of KEJ Financial Advisors, his fee-only financial planning company. 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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