Thursday, April 07, 2005

Company Update:
PICO Holdings
Ticker: PICO : $26.10
Market Cap: $322.76 million
Average Daily Volume: 18000

We featured PICO Holdings in our January 21st column: PICO Holdings, Mini Berkshire Hathaway?, and wanted to give an update, based on a recent event.

On April 5th , the company’s subsidiary Vidler Water Company, announced an agreement to sell 15,470 acres of Arizona land, along with 42,000 acre feet of water, to an unnamed Arizona developer, for $95.25 million in cash, or $6157.10 per acre. The carrying cost of the assets being sold is $35 million.

That’s a $60 million capital gain for PICO. More relevant, though is the purchase price, relative to PICO’s market cap of $323 million. I continue to be impressed by PICO management, and their ability to identify and purchase undervalued assets, and ultimately convert them into cash. (The author does have a position in PICO Holdings)

It is not clear, at this point, the tax consequences of the property sale. Nor is it clear how PICO will utilize the proceeds. There really are just four possibilities: A share buyback (unlikely), acquisitions, institution of a dividend (also unlikely), further investment in undervalued (in management’s eyes) securities, or a combination. Stay tuned.

*The author has a position in this stock. This is neither a recommendation to buy or sell this security. All information provided believed to be reliable and presented for information purposes only.

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