Q3 2024 Portfolio Fair Value Updates

Stock fair value updates for Alico, Motorcar Parts of America, Tandy Leather Factory, and Jewett-Cameron Trading company

Dec 16, 2024

Now that earnings season is mostly done, I thought it would be good idea to update the fair values of some of the stocks in my portfolio. The four stocks I will discuss today are Alico (ALCO), Motor Car Parts of America (MPAA), Tandy Leather Factory (TLF), and Jewett-Cameron Trading Company (JCTC). Coincidentally I value all four of these stocks based on their assets instead of their earnings power.

Alico

For Alico, I value the company based on their assets. I use 1.5x book value as a short cut since the company has historically traded around that level. Also this multiple corresponds nicely to my estimated net asset value that incorporates a more realistic value of Alico’s land. ALCOs latest book value has declined to $33.64 a share from $36.27 last quarter. This means Alico’s fair value has fallen to $50.50 from $54.40. The hit to book value came mostly from declining current assets, both cash and inventory balances were down this quarter compared to the previous quarter. Liabilities increased slightly with Alico’s line of credit going from unused to an $8.4M balance. Offsetting this is a reduced balance in accounts receivable and an $8.5M “other current liability” from last quarter that has been reduced to $500k. During two quarters of the year Alico is harvesting, which provides cash, and the other two quarters they are consuming cash without as much income. This means their balance sheet will ebb and flow based on working capital requirements. The company’s financials have taken a beater from the impacts of the hurricanes. Alico’s book value has been declining over the past few quarters, but I think it will bounce back once the company has some good harvests. Even though book value has been declining, my fair value is still quite higher than the current stock price of $25.90 a share.

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Motorcar Parts of America

I estimate Motorcar Parts of America’s fair value to be about 1x book value which was $13.60 last quarter. The company’s latest equity value is $264M, down about $3M, so book value is now $13.50 a share. In my original write up I valued MPAA using a reproduction value approach. In that process, I roughly estimated the cost for a competitor to acquire the same facilities, skilled employees, and the cost to develop a competing diagnostic tool MPAA has been developing. The replacement value approach produced a much higher fair value estimate, so in order to be conservative, I handicapped my fair value estimate to the company’s book value. On the latest balance sheet, MPAAs current assets increased by $8.2M, no change in long term assets, current liabilities up $2.6M, long term liabilities up $9M. Motorcar Part’s has seen growing revenue and nice gross margins, but operating and financing costs have hurt them. The company has significant interest costs which should be decreasing, and the company has announced that better pricing from the parts retailers will be coming into effect. The stock has had a nice rally since early November, going from $5.25 a share to over $8 now.

Tandy Leather Factory

The last time I updated my fair value for Tandy Leather was back in September. The valuation approach I take is to calculate its net current asset value, then add on the value of their HQ/warehouse that was listed for sale. Previously I calculated their NCAV as $42.2M. Now NCAV is $41.9M, or $4.90 a share. Tandy has no debt, so change in NCAV is from working capital. Originally I estimated their HQ would sell for $16.5M. However Tandy recently announced that it sold for $25M. Adding the proceeds to the NCAV boosts TLFs fair value to about $7.90. I thought the stock would move closer to my fair value after the sale was announced. TLF ran up about 25% the day after the announcement, but the rally fizzled out and now the stock is back below $5.

Jewett-Cameron Trading Company

Back in September I calculated Jewett-Cameron’s fair value to be $7.30. I used the same method as Tandy Leather, first calculating the company’s net current asset value, then adding in value for land they are trying to sell. Previous NCAV was $20M or $5.70 a share. Now JCTCs NCAV is $18.6M, or $5.29 a share. Last year the company shut down a seed cleaning plant located in a small town in Oregon. Recently Jewett-Cameron have listed the 11 acres site for sale. I assumed the 11 acres might be worth $500k an acre since its on the edge of town, so this comes out to be $5.5M in value. Adding this $5.5M in land gets an estimated asset value $24.1M, or $6.90 a share. Looks like the decrease in NCAV is mainly in accounts receivable and inventory, JCTC has no debt. Sales largely tied to home improvement, which has been suffering the past year. In the few months that I’ve owned JCTC, the stock has ranged between $4 and $5 a share. Once sales pick back up and they sell the land, I think Jewett-Cameron’s stock price could move closer to my fair value.