Monday, May 13, 2013

Calloway's Nursery & Activism

This post will be short and sweet.

A lot of times as a value investor, I come across and invest in companies that either have activists, or are in a situation that gets activists involved. This is probably virtue of the fact that a lot of times when a stock becomes a value stock, there are issues with the company that need to be addressed.

Calloway's is no exception. Having been written up by OTC Adventures, the company is no secret to the value investing community. When reading this, one of my friends, (good investor and guest poster here at Ragnar) DTEJD1997, alerted me to the fact that some of the real estate the company owns is quite desirable. This immediately piqued my interest and I started researching it- coming up with the following spreadsheet.

As you can see, the tax assessor believes that the company owns some dandy parcels of real estate. Further analysis makes me really like the properties as well. If sold, it would seem that these properties are some of the most re-developable land in existence. They already have zoning in their favor and it isn't as if most nursery locations have a lot of stuff to demo and haul away to redevelop. After all, these locations are little more than a poured slab and some tents, water hoses, and lawn timbers (with a few exceptions). In most cases, it seems that the real estate is on the books for far less than it is actually worth. Throw that in with the company being located in Texas with great economic, real estate, and demographics plays, and you have a company that I own some common stock of.

One of the most interesting items here, is the location at Voss Road... Google Map it and you can see in the most simplistic way, that it is a fantastic location and is likely worth the entire market cap of the company... that sort of situation doesn't happen all that often.

View Larger Map

The only item I don't really like was with regard to the dilution to the common stock, taking places at very unfavorable prices for everyone that wasn't receiving the newly issued stock. Now, activists are looking to replace the board over it, by calling a meeting of shareholders. This investment reminds me of a touch of Syms, but where the underlying business is profitable, and as a whole, not a terrible. You are also getting a lot of assets which are trading well below their likely understated book value. I have liked this company since I first read about it and have been buying shares over the past few months.

I am sure that there will be more to come out of this interesting situation...

Disclosure/Disclaimer:  I own and represent shares of Calloways. I reserve the right to change the positions at any time. This post is my nothing more than my thoughts/opinion. Always do a ton of your own research before so much as contemplating anything that I say, do, write, or even think about.

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