CAOX - California Orchard Company

[ScottHall]

This is my understanding too. Someone at CAOX told me that some shares got out that "weren't supposed to," and that's how the public stock market listing happened. I've heard that a lot.

It's semantics, but what CAOX has is not a public stock market listing. The company isn't public, and it isn't listed. It's a private company that has shares that can be traded on the pink sheets.

 

There's a reason I phrased it as I did, and that reason is information compression. I do try to write in colloquialisms to convey information in a visual, simple to understand way. It's storytelling, you see. It wasn't so long ago I looked at the world in the same way you do, very pedantic and technical. I don't mean that as an insult, by the way; there is a place for it in some fields.

 

Unfortunately the world in general doesn't really work that way. Outside of small subculture (this one), nobody cares about this point. What they care about is that they can buy the stock; that it's "publicly traded." That has been compressed over the years to mean "I can buy it."

 

Information compression is a way to conflate two subjects that are similar but not quite the same in order to present it in a way that can be more easily related to the reader. Somebody might not understand the explanations of the Pink Sheet broker dealer page but they can get the idea if you say stock market.

 

One rule I've adopted in writing is that smart can read dumb but dumb can't read smart. It's not always possible, but unless you're writing to impress the NYC crowd, the default for me is writing to a middle school level as much as I can.

 

Another example of information compression is how I got a family member into investing. He always found finance boring, but he loved strategic board game. So I compared investing to one of his favorite games, ironically, 1830: Railways and Robber Barons.

 

When I compared competitive advantage in investing to the advantages the players could develop from building their railroad networks, the concept instantly clicked with him. He's still new to the game but his first few investments have been killer.

 

It's important to learn to communicate in a way that is effective rather than literal; you lose a lot of readers if you DON'T do this. You're basically just conveying information by meme.

 

TL;DR: not everyone has the same experiences and it's a bad idea to assume technical literacy or just literacy in general. Avoid the primrose path of local optimums... or is it optima?  ;D

[DooDiligence]

This is my understanding too. Someone at CAOX told me that some shares got out that "weren't supposed to," and that's how the public stock market listing happened. I've heard that a lot.

It's semantics, but what CAOX has is not a public stock market listing. The company isn't public, and it isn't listed. It's a private company that has shares that can be traded on the pink sheets.

 

There's a reason I phrased it as I did, and that reason is information compression. I do try to write in colloquialisms to convey information in a visual, simple to understand way. It's storytelling, you see. It wasn't so long ago I looked at the world in the same way you do, very pedantic and technical. I don't mean that as an insult, by the way; there is a place for it in some fields.

 

Unfortunately the world in general doesn't really work that way. Outside of small subculture (this one), nobody cares about this point. What they care about is that they can buy the stock; that it's "publicly traded." That has been compressed over the years to mean "I can buy it."

 

Information compression is a way to conflate two subjects that are similar but not quite the same in order to present it in a way that can be more easily related to the reader. Somebody might not understand the explanations of the Pink Sheet broker dealer page but they can get the idea if you say stock market.

 

One rule I've adopted in writing is that smart can read dumb but dumb can't read smart. It's not always possible, but unless you're writing to impress the NYC crowd, the default for me is writing to a middle school level as much as I can.

 

Another example of information compression is how I got a family member into investing. He always found finance boring, but he loved strategic board game. So I compared investing to one of his favorite games, ironically, 1830: Railways and Robber Barons.

 

When I compared competitive advantage in investing to the advantages the players could develop from building their railroad networks, the concept instantly clicked with him. He's still new to the game but his first few investments have been killer.

 

It's important to learn to communicate in a way that is effective rather than literal; you lose a lot of readers if you DON'T do this. You're basically just conveying information by meme.

 

TL;DR: not everyone has the same experiences and it's a bad idea to assume technical literacy or just literacy in general. Avoid the primrose path of local optimums... or is it optima?  ;D

 

Ethos (which you have firmly established, Pathos (ninja master), and Logos (ditto...)

 

I've been knocking the socks off my English Comp profesor, but you would send him into belletristic ecstasy.

[oddballstocks]

This is my understanding too. Someone at CAOX told me that some shares got out that "weren't supposed to," and that's how the public stock market listing happened. I've heard that a lot.

It's semantics, but what CAOX has is not a public stock market listing. The company isn't public, and it isn't listed. It's a private company that has shares that can be traded on the pink sheets.

 

The distinction doesn't matter.  By law public/private shareholders have the exact same rights regardless of how they purchased their shares.

 

You can buy shares in a lot of private companies by just simply calling them and saying "I'm an investor, I'd like to invest"

 

Private/public only matters regarding SEC registration.  When you cross a certain threshold of investors you're required to file with the SEC.  This is why Davey Tree, and Publix are SEC filers, but it's impossible to buy shares unless you're an employee with access to the ESOP.

[ScottHall]

Another thing I'll note about storytelling, and writing in general, is that the words you use don't tend to matter much to performance so long as the reader understands what you're saying. I think every investor should really read a marketing book or two, Tested Advertising Methods is my favorite. It can change the way you look at everything, if you let it. I've known people on this forum who have taken this advice and it has changed their lives.

 

And it can make you a better investor, because you'll have a basic idea of sales. So many investors don't understand that marketing and sales are insanely powerful tools - literally can seem like magic when you do it right - and if you have an understanding of them you can spot winners a mile away that your boring value guy wouldn't ordinarily be able to put together. Wayfair and National Beverage found their way into my portfolio this way, at much lower prices than today.

 

Value investing is a useful skill, but ONLY learning the fundamentals of value investing is like going into MMA and only using Brazilian Jiu-Jitsu because Royce Gracie won the first UFC. You can use that value skill as a base, but to be really competitive you're going to want to add in specific business skills and possibly even new investing styles. It is the synthesis of these skills and ideas that brings real insight, not any one on its own. Your knowledge is a network effect upon itself.

 

It is a way to manufacture your own competitive advantage; your own unique combination of skills that buff your other skills. It's sort of like in Final Fantasy V with the job system where each character can master multiple jobs, so that you could mix and match and have a Blue Mage who is also a Time Mage, or a Ninja Spellsword. Find those complimentary skills and you can discover those "game-breaking" insights.

 

I run a hybrid growth-value style now, used to be a pure value investor and pretentious about it. I had fallen into a cult, the same one a lot of members of the site are in right now and  don't even realize it. Because of my willingness to adapt, I've now had big winners in both styles. It makes my portfolio more well-rounded and keeps my teeth sharp to try out new investing styles.

 

I allocate, within my portfolio, my own R&D budget to try out investing styles that are new to me. Originally it was growth investing. I put $1k into Amazon after being convinced by a coworker. It wasn't much, but that little nudge over the edge was all I needed to break free of the cage in my head and made me willing to accept growth investing as a viable strategy.

 

These days it's more like momentum trading/market psychology and playing around with options strategies. The idea is that I suspect I will lose the money, but by experimenting I may come up with unique and interesting insights. The world has so much to teach us all, if we just let it speak to us.

 

My skill in investing helps my marketing efforts and my skills in marketing help my investing efforts. It's an investment in yourself that I suspect you wouldn't regret making, if you take the time to read the Tested Advertising Methods book.

[ScottHall]

This is my understanding too. Someone at CAOX told me that some shares got out that "weren't supposed to," and that's how the public stock market listing happened. I've heard that a lot.

It's semantics, but what CAOX has is not a public stock market listing. The company isn't public, and it isn't listed. It's a private company that has shares that can be traded on the pink sheets.

 

There's a reason I phrased it as I did, and that reason is information compression. I do try to write in colloquialisms to convey information in a visual, simple to understand way. It's storytelling, you see. It wasn't so long ago I looked at the world in the same way you do, very pedantic and technical. I don't mean that as an insult, by the way; there is a place for it in some fields.

 

Unfortunately the world in general doesn't really work that way. Outside of small subculture (this one), nobody cares about this point. What they care about is that they can buy the stock; that it's "publicly traded." That has been compressed over the years to mean "I can buy it."

 

Information compression is a way to conflate two subjects that are similar but not quite the same in order to present it in a way that can be more easily related to the reader. Somebody might not understand the explanations of the Pink Sheet broker dealer page but they can get the idea if you say stock market.

 

One rule I've adopted in writing is that smart can read dumb but dumb can't read smart. It's not always possible, but unless you're writing to impress the NYC crowd, the default for me is writing to a middle school level as much as I can.

 

Another example of information compression is how I got a family member into investing. He always found finance boring, but he loved strategic board game. So I compared investing to one of his favorite games, ironically, 1830: Railways and Robber Barons.

 

When I compared competitive advantage in investing to the advantages the players could develop from building their railroad networks, the concept instantly clicked with him. He's still new to the game but his first few investments have been killer.

 

It's important to learn to communicate in a way that is effective rather than literal; you lose a lot of readers if you DON'T do this. You're basically just conveying information by meme.

 

TL;DR: not everyone has the same experiences and it's a bad idea to assume technical literacy or just literacy in general. Avoid the primrose path of local optimums... or is it optima?  ;D

 

Ethos (which you have firmly established, Pathos (ninja master), and Logos (ditto...)

 

I've been knocking the socks off my English Comp profesor, but you would send him into belletristic ecstasy.

 

Thanks Strings! I am glad to hear that the schooling is going well for you. Empathy is underrated!

[oddballstocks]

These days it's more like momentum trading/market psychology and playing around with options strategies. The idea is that I suspect I will lose the money, but by experimenting I may come up with unique and interesting insights. The world has so much to teach us all, if we just let it speak to us.

 

 

I love momentum.  I realized years ago that 60% of my returns came from re-rating to IV, and the other 40% from just holding on after the jump.

 

Check out Options as a Strategic Investment.  It's a huge book, but each chapter is atomic, you can look for strategies that make sense.  They cover how/why you'd do each, and which market condition it makes sense in.

 

What I've discovered is once you understand these strategies you can then find situations where the options aren't trading the same as the equity and can take advantage of that gap.  I don't trade my equity shares for small bumps, but I don't mind doing the same with options.

 

If you're ok with illiquid stocks you'll be ok in illiquid option markets as well.  With cheap commissions at a place like IB you can create synthetic trades very cheaply.

 

In many ways I look at options markets like a value investor might have looked at equities in 1960.  Options are very short term focused, on a few variables.  If you have a different time horizon, or are looking at the underlying company you can stumble on awesome opportunities from time to time.

[John Hjorth]

... I still have one share of VULC ( had an order in for a hundred but somehow ended up with one share LOL) ...

 

Off topic:

 

Spekulatius,

 

I have been there, done that and got that shirt a couple of times, too - while buying and selling illiquid Danish bank stocks. In my cases, there was a market maker screwing me for commisions. The solution was for me to enable "Fill or kill" on the orders. I don't know if that's possible for you, though.

[Spekulatius]

... I still have one share of VULC ( had an order in for a hundred but somehow ended up with one share LOL) ...

 

Off topic:

 

Spekulatius,

 

I have been there, done that and got that shirt a couple of times, too - while buying and selling illiquid Danish bank stocks. In my cases, there was a market maker screwing me for commisions. The solution was for me to enable "Fill or kill" on the orders. I don't know if that's possible for you, though.

 

I can do fill or kill(I think), but heard that it often leads to getting nothing at all. I don’t mind getting one share really, since the commission with IB is only $1/ trade. It’s just mind boggling that there is somebody out there selling you one share when you bid for 100 for a stock that hasn’t traded for 2 weeks before.

[Jurgis]

It’s just mind boggling that there is somebody out there selling you one share when you bid for 100 for a stock that hasn’t traded for 2 weeks before.

 

It's possible that someone sold all shares but 1 in trade(s) two weeks (or more) ago and just got to put in sell order for last share.

It's also possible that they kept 1 share for the same reasons you guys buy 1 share - for getting info from company - and then decided they don't need/want it anymore just around the moment when you put in the order.

It's also possible that it's a small/inexperienced/whatever investor who only bought 1 share... and then sold it.

 

Pink land is a land of wonders.  8)

 

I've heard that in the past MMs used to sell you 1 share on limit orders on purpose to screw your commissions. This is likely not the case for pink stock with no trades though.

[benhacker]

It’s more likely a 1 share is used by and MM or trader to push your “100 share” order to 99 shares so your order doesn’t show as part of the regular bid x ask... and then the spread widens for their trading.

[ScottHall]

Hey guys,

 

I just got another dividend check in the mail for my lone share held in my own name on the books and records. I imagine I'll cash this one - the first one was for $10, this one was for $20. The first one I am keeping as an artifact of my excavation. It's worth more in sentiment than monetary value. This one, though, could buy me a pizza, so I'm not screwing around this time.

 

The last dividend took a little longer to hit my brokerage account than to get the check; so far that's the case this time too. It seems as though it takes longer to process, but the dividend does come through.

 

Just thought I'd give a little update on the dividend situation for those who only have shares in brokerage. Last dividend hit my account late January if anyone cares about timing games.

[DooDiligence]

Hey guys,

 

I just got another dividend check in the mail for my lone share held in my own name on the books and records. I imagine I'll cash this one - the first one was for $10, this one was for $20. The first one I am keeping as an artifact of my excavation. It's worth more in sentiment than monetary value. This one, though, could buy me a pizza, so I'm not screwing around this time.

 

The last dividend took a little longer to hit my brokerage account than to get the check; so far that's the case this time too. It seems as though it takes longer to process, but the dividend does come through.

 

Just thought I'd give a little update on the dividend situation for those who only have shares in brokerage. Last dividend hit my account late January if anyone cares about timing games.

 

Nice.

[Foreign Tuffett]

This is worth a watch:

 

https://vimeo.com/233051841

 

The stock still looks cheap to me. The land purchase early last year gives us what is probably a good comp for the value of its acreage. Even if you discount that per acre value somewhat, it's easy to make a case that CAOX is trading at less than 50% of the value of its owned acreage.

 

Many dark companies have questionable long term business prospects. While CAOX will certainly have good years and bad years, it's unlikely its land will ever become permanently impaired.

 

 

[johnny]

Since this popped up in the other wino thread, any chance that the 2017 AR has fallen off a truck somewhere?

[Foreign Tuffett]

Since this popped up in the other wino thread, any chance that the 2017 AR has fallen off a truck somewhere?

 

I don't have it, but if you go back and find the link to the Medium article that was posted earlier in this thread, many of the 2017 #s are included in it.

 

Scott posted on Twitter earlier this year that the company printed a $80.41 EPS # in 2018. Company paid a $20 per share divi this April. Over time their land should slowly appreciate + @ current stock price you a buying at what I think is a 50+ % discount to NAV. Finally, something like ~78% of CAOX's land is leased out on two very long term leases -- much better to be a landlord than an operator.

[spartan]

Gladstone Land acquired 324 acres of farmland in Salinas, California for $9.0 Million a few months ago.

 

Although the land is used to grow strawberries and vegetables, the deal implies a land value of $27,800 per acre.

 

https://www.globenewswire.com/news-release/2019/07/11/1881719/0/en/Gladstone-Land-Acquires-324-Acres-of-Coastal-Farmland-in-Salinas-California.html

 

There are some problems with local water supply:

 

https://www.latimes.com/local/california/la-me-drought-salinas-valley-20150907-story.html

 

My calculations could be wrong, but I computed the following for owned property (in acres):

 

Arroyo Loma I = 315.8

Arroyo Loma II-Upper = 308.6

Scheid Vineyards = 787.8

Centennial Vineyard = 140.0

Total owned = 1,552.2

 

The rest of the land is either sub-leased (Alta Loma = 249.33), operating (Airport/Monroe = 170.84, Lago = 99.84), or irrelevant (Los Ositos).

 

NAV per Precedent Transaction: $27,800 x 1,552.2 = $43,145,600

Current Market Cap = $1,700 x 19,747 = $33,569,900

 

Now, having said all of that, one should probably look into individual vineyards and see just how much they're worth. Vineyards are presumably worth more than strawberry and vegetable farms.

[Foreign Tuffett]

Gladstone Land acquired 324 acres of farmland in Salinas, California for $9.0 Million a few months ago.

 

Although the land is used to grow strawberries and vegetables, the deal implies a land value of $27,800 per acre.

 

https://www.globenewswire.com/news-release/2019/07/11/1881719/0/en/Gladstone-Land-Acquires-324-Acres-of-Coastal-Farmland-in-Salinas-California.html

 

There are some problems with local water supply:

 

https://www.latimes.com/local/california/la-me-drought-salinas-valley-20150907-story.html

 

My calculations could be wrong, but I computed the following for owned property (in acres):

 

Arroyo Loma I = 315.8

Arroyo Loma II-Upper = 308.6

Scheid Vineyards = 787.8

Centennial Vineyard = 140.0

Total owned = 1,552.2

 

The rest of the land is either sub-leased (Alta Loma = 249.33), operating (Airport/Monroe = 170.84, Lago = 99.84), or irrelevant (Los Ositos).

 

NAV per Precedent Transaction: $27,800 x 1,552.2 = $43,145,600

Current Market Cap = $1,700 x 19,747 = $33,569,900

 

Now, having said all of that, one should probably look into individual vineyards and see just how much they're worth. Vineyards are presumably worth more than strawberry and vegetable farms.

 

As you have acknowledge, the Gladstone Land deal isn't a good comp. Not the same crop, different city (Salinas vs Greenfield), and the press release references "324 gross acres" so it's unclear how many net acres of arable land they actually purchased. CAOX's purchase of the "Centennial vineyard" for upwards of $43K per acre in early 2018 is almost certainly a much better comp.

 

Re water rights: Most if not all of CAOX's land is in close enough proximity to the Salinas River that it was submerged by a flood in 1969. Also, given that CAOX has been farming largely the same land for ~100 years it probably has good access to water and strong water rights claims.

 

Why aren't you giving the company any credit for the Airport/Monroe and Lago tracts?

 

[spartan]

Gladstone Land acquired 324 acres of farmland in Salinas, California for $9.0 Million a few months ago.

 

Although the land is used to grow strawberries and vegetables, the deal implies a land value of $27,800 per acre.

 

https://www.globenewswire.com/news-release/2019/07/11/1881719/0/en/Gladstone-Land-Acquires-324-Acres-of-Coastal-Farmland-in-Salinas-California.html

 

There are some problems with local water supply:

 

https://www.latimes.com/local/california/la-me-drought-salinas-valley-20150907-story.html

 

My calculations could be wrong, but I computed the following for owned property (in acres):

 

Arroyo Loma I = 315.8

Arroyo Loma II-Upper = 308.6

Scheid Vineyards = 787.8

Centennial Vineyard = 140.0

Total owned = 1,552.2

 

The rest of the land is either sub-leased (Alta Loma = 249.33), operating (Airport/Monroe = 170.84, Lago = 99.84), or irrelevant (Los Ositos).

 

NAV per Precedent Transaction: $27,800 x 1,552.2 = $43,145,600

Current Market Cap = $1,700 x 19,747 = $33,569,900

 

Now, having said all of that, one should probably look into individual vineyards and see just how much they're worth. Vineyards are presumably worth more than strawberry and vegetable farms.

 

As you have acknowledge, the Gladstone Land deal isn't a good comp. Not the same crop, different city (Salinas vs Greenfield), and the press release references "324 gross acres" so it's unclear how many net acres of arable land they actually purchased. CAOX's purchase of the "Centennial vineyard" for upwards of $43K per acre in early 2018 is almost certainly a much better comp.

 

Re water rights: Most if not all of CAOX's land is in close enough proximity to the Salinas River that it was submerged by a flood in 1969. Also, given that CAOX has been farming largely the same land for ~100 years it probably has good access to water and strong water rights claims.

 

Why aren't you giving the company any credit for the Airport/Monroe and Lago tracts?

 

Fair point. I just wanted to bring it up given that it is a fairly recent transaction in close proximity.

 

I was under the false impression that Airport/Monroe and Lago tracts are not owned by the company. My apologies. That would bring their land up to 1,823 acres. Thank you for correcting this.

[Jurgis]

Re water rights: Most if not all of CAOX's land is in close enough proximity to the Salinas River that it was submerged by a flood in 1969. Also, given that CAOX has been farming largely the same land for ~100 years it probably has good access to water and strong water rights claims.

 

I have no clue about CAOX, but referring back to water situation in 1969 in California is like referring to LA metro RE prices in 1969. 8)

Water situation has gotten radically worse since then with lakes/rivers pretty much disappearing. A bunch of that stuff has been covered in CoBF threads on various CA agri/land/water cos. If I was invested in this name, I'd probably try to get more info than referring to 1969 and 100 year history. 8) Edit: on your side though Salinas River might be small enough be only directly impacted by climate vs other rivers/lakes that are also hugely impacted by upstream water drawing. But I don't know more than that.  8)

[Foreign Tuffett]

Re water rights: Most if not all of CAOX's land is in close enough proximity to the Salinas River that it was submerged by a flood in 1969. Also, given that CAOX has been farming largely the same land for ~100 years it probably has good access to water and strong water rights claims.

 

I have no clue about CAOX, but referring back to water situation in 1969 in California is like referring to LA metro RE prices in 1969. 8)

Water situation has gotten radically worse since then with lakes/rivers pretty much disappearing. A bunch of that stuff has been covered in CoBF threads on various CA agri/land/water cos. If I was invested in this name, I'd probably try to get more info than referring to 1969 and 100 year history. 8) Edit: on your side though Salinas River might be small enough be only directly impacted by climate vs other rivers/lakes that are also hugely impacted by upstream water drawing. But I don't know more than that.  8)

 

My point was that much of CAOX's acerage is close enough to the Salinas River (which does in fact still exist) that when the river flooded in 1969 much of the land in question was submerged. I think that's germane in the context of a discussion about how much access to water the company has.