Dealmaker’s Diary: Striking Gold in the Sunshine State

Alpesh Patel|June 6, 2024

What happens when you combine real estate, Florida and a company you’ve likely never heard of?

You get a hidden gem that’s doing something right in the battered real estate sector.

This realty company with a portfolio of income-producing properties has been growing revenue at a strong 25% per year on average.

And on my proprietary Growth-Value-Income rating system… it scores a 7. (The system my hedge fund clients pay thousands to access!)

Couple that with low volatility and rising momentum…

Plus a price that’s half of what it should be…

And it all adds up to what could be a huge opportunity.

Get all the details on the company – including the ticker – in my latest video.

Click on the image below to check it out.

TRANSCRIPT

Hello, friends. So my team has just sent me a selection of companies for me to consider in my Dealmaker’s Diary, my Stock of the Week. And I have chosen this one…

Consolidated – wait for it – Tomoka Land Company [Note: now CTO Realty].

Now, what I love about my Dealmaker’s Diary is I just never know what’s going to come up. Until I go through the data… or rather, my team goes through the data, then they give me a shortlist. And I get so excited that even if I’m at home, even if I’m fresh from the gym, I want to share it with you.

So there’s no time to spare. There’s no, oh, let me put on a suit and tie, get to the office, do it then. No. I want to share it with you straight away because I get excited by all of this as well.

It’s a bit like prospecting for gold, and when you find something, you know, who’s going to hang around?

Consolidated-Tomoka Land (CTO Realty – CTO) is a publicly traded real estate company – now, I don’t think we’ve ever had one of those in the Diary – primarily in Florida. I’ve got family in Florida.

It also externally manages and owns interest in Alpine Income Property. So we’re really talking about real estate now. Real estate has been one of the few sectors which has absolutely been battered this year to the extent – as you’re about to see – that’s it’s thrown up some opportunities as well.

It’s got a portfolio of income-producing properties, including commercial real estate and land holdings.

Revenues have been growing at an average rate of 25% per annum on average. I mean, you’ve got to go with those numbers.

Now, you might say, well, wait a minute. It’s all Florida-related. It’s not global, etc. I know – it’s the opposite end of what we normally look at. It’s also a relatively small company with a market cap of $355 million. But by the standards of what we normally look at, it does pay a dividend.

Now, here’s what caught my attention. On my Growth-Value-Income rating, it’s got a 7. That means when I look at the valuation of the company, the revenue growth, the dividend yield, it’s there.

CROCI – cash return on capital invested – is 4.8%. A bit lower than what I’d like, and you can see right here why CROCI is important. The higher the cash return on capital invested, the better. But 4.8% is not a bad number, actually.

The Sortino’s positive, which is the average return versus the downside risk. Volatility, very low. Well, it’s a good mixture for a portfolio to have some of that.

Now, what also caught my eye very much was the momentum. I want to see that monthly MACD gradient rise above its moving average. So the dotted blue line above the yellow, and that tells me that long- and short-term average prices are rising in the stock.

And also on the weekly, we’ve got a bit of a rise. So we should get an immediate bump up on this in the right trend.

The one thing which I like to look at and sometimes concerns me is the peak to trough in previous upward trends. And you can see, it’s dropped 25% in the past.

And here’s the kicker for you.

On a discount cash flow basis, the company is significantly undervalued as well. That fits into the overall thesis that this sector has been battered a little bit.

So, Consolidated-Tomoka Land is an interesting one, different to what we’ve normally had.

I’m happy.