A First Look at J.G. Boswell

Feb.24.10 | About: Boswell (J.G.) (BWEL)

One of the most fascinating companies I've come across in my investing lifetime is the J.G. Boswell (OTCPK:BWEL) company. It trades under the ticker BWEL on the pink sheets.

Why is it so interesting? Well, for one, they don't provide financial statements to the public. You must be a shareholder to have a look under the hood. And, even then, they don't do much more than provide you with a set of audited financial statements.

A second reason is that J.G. Boswell is the largest private farming operation in the world. They own almost 150,000 acres of land in California in the Lake Tulare river bed with about 1/3 of the land devoted to cotton and the remainder growing tomatoes, alfalfa, wheat, and onions.

In addition, they own another 30,000 acres of land in Australia through a subsidiary named Auscott and two real estate developments in California. Finally, some claim that the water rights attached to the land and its proximity to large metropolitan areas of California are where the real value is: hundreds of thousands of acre-feet of water worth billions of dollars.

The Cheap Stocks blog maintained by Jonathan Heller was the first place I heard about J.G. Boswell. His first mention of the company dates back to January 2005 and the post is worth a read if only to hear about some of the details he uncovered from documents for a company-sponsored tender offer (link here).

I became an owner for $500 per share in late 2009 after becoming comfortable that the whole thing wasn't a fraud. Let's take a peek into the financials as of June 30, 2009:

  • Shares Outstanding: 983,873
  • Sales(ttm): $339 million
  • Net Income(ttm): $22.14 million
  • Diluted Earnings per Share(ttm): $22.51
  • P/E at purchase price: 22.21x
  • Debt: $158 million
  • Cash: $2 million
  • EV at purchase price: $492 mkt cap + 158 - 2 = $648 million
  • EBIT(ttm): $39 million
  • EV/EBIT at purchase price: 16.6x
  • EV/Acre: $3,767
  • Annual Dividend (Yield): $14 (2.8%)
  • Book Value per Share (P/B): $452 (1.1x)

While I don't think that I necessarily purchased BWEL at bargain basement prices, I do think that they are very fair and should enable me to earn a decent return with the possibility of a large upside surprise due to a revaluation of their assets (Note that, in 6 years, book value has grown from $343 to $452 plus another ~$80 in dividends). I also think that BWEL will serve as a successful inflation hedge in the years ahead.

For those of you looking to learn more about J.G. Boswell, I highly recommend The King of California by Mark Arax and Rick Wartzman. You'll gain some more insight into the businessman and why his company has retained a cult following for so many years. We will keep our eye on the stock and update you whenever we have new material information.

Disclosure: Author holds a long position in OTCPK:BWEL