Marvelous Microcaps

Alico, Inc. (ALCO)

INTRO:

At Perritt Capital Management, we take focused positions in companies where we have a high conviction in their success; companies that are out of the mainstream of small cap investing. To highlight our process, we are pleased to present the newest installment in our ongoing series “Marvelous Microcaps – Big Ideas on Small Companies.”  This series profiles companies that we believe have a niche in their existing markets or are launching a product that could disrupt their marketplace.

THE COMPANY:

Alico, Inc. (ALCO) is an agricultural and land management company with 103,000 acres of land in Florida.  It is also one of the largest citrus producers in the U.S.  The land not being used for citrus is leased for grazing rights, hunting, farming, and mining and oil extraction rights.  Given the preponderance of hurricanes in Florida, the company has started efforts to transition citrus groves to developable residential and commercial land.  Regardless of what the land is used for, the current enterprise value is $277 million.  That equates to a very economical $5000/acre for Florida land.

WHY WE OWN: THE PERRITT ADVANTAGE

We believe ALCO is an undiscovered gem with its growth opportunities and potential monetization of non-core land assets.  Any stock weakness due to weather and the effect on the citrus crops is an opportunity to buy the stock.  Hurricane Milton did not cause significant tree damage but there will be a measurable fruit drop in some areas.  Tropicana is their largest customer amounting to 88% of 2023 revenue.  There may be a further increase in orange juice prices due to the storms in Florida.  ALCO just renewed their contract with Tropicana for 3 more years and at prices that are 33-50% higher.

In the third quarter of 2024, ALCO sold 798 acres of citrus groves for $7.2m or $9000/acre.  Using management’s estimates, their real estate could be worth about $50/share.  There is considerable upside as some of the land is near major cities and could be worth quite a bit more.  This is a company that has a solid business evidenced by a long-term contract with a major client for its citrus product.  Underlying all of this is a hugely valuable asset in their land.

Data here is obtained from what are considered reliable sources.  We consider the data used to be relevant and reliable.

Fund holdings and sector allocations are subject to change at any time and should not be considered a recommendation to buy or sell any security. Please click PRCGX and PREOX for a list of the top ten holdings.

Enterprise value, total enterprise value, or firm value is an economic measure reflecting the market value of a business.

Before you invest in the Perritt MicroCap Opportunities Fund or Perritt Ultra MicroCap Fund, please refer to the prospectus for important information about the investment company, including investment objectives, risks, charges, and expenses. You may also obtain a hard copy of the  prospectus by calling 800-331-8936. The prospectus should be read carefully before you invest.

Mutual fund investing involves risk. Principal loss is possible. The Funds invest in smaller companies, which involve additional risks, such as limited liquidity and greater volatility. The Funds invest in microcap companies which tend to perform poorly during times of economic stress. The Ultra MicroCap Fund may invest in early-stage companies which tend to be more volatile and more speculative than investments in more established companies. 

Past Performance does not guarantee future results.

The Perritt Funds are distributed by Quasar Distributors, LLC.

First published November 2024.

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