Buy Tejon Ranch Shares

One small-cap play worth considering, according to Zacks senior consumer non-durables analyst Steven Ralston, CFA is Tejon Ranch Company (TRC - Analyst Report), which can be considered a true growth play on the currently strong agriculture industry:

"Management is pursuing the real estate development of the 270,000 acre Tejon Ranch located in Southern California. The company's three major development projects are the Tejon Industrial Complex, Tejon Mountain Village and Centennial. As commercial, industrial and residential entitlements are pursued, the stock's valuation ought to expand significantly. Our Buy rating is maintained.

"Despite the facts that Tejon's three development projects comprise less than 10% of Tejon Ranch and that approximately 130,000 acres may be set aside for environmental conservation and good stewardship, the stock should be valued on a Price/Acre basis. The stock's valuation has moved up on a stair-step basis as development projects are being successfully pursued.

"Between 2000 and 2001, the stock traded between $1,400 and $900 per acre. Over the next two years, the valuation zone increased to $2,200 to $1,200. Over the last three years, the valuation range again increased to $3,800 to $2,300 per acre. Our target price is $65.00 per share based on a valuation of $3,800 per acre.

"We expect the value of land to significantly increase as further entitlement processes are completed, which involve state and county approval along with the expected subsequent law suits by environmental groups. As management succeeds in its vision of developing Tejon Ranch over the next 25 years, the valuation per acre should dramatically increase. Over the next few years, we expect the valuation to increase to $6,000 per acre as progress is made towards entitlements for Tejon Mountain Village and Centennial and as the Foreign Trade Zone area is expanded."

Read the full analyst report on TRC.

Read the full analyst report on TRC