Tuesday, November 18, 2008

PICO Holdings Update

PICO reported Q3 revenue of $9.1 million, nearly double same quarter last year, and net income of $533K, up 12%. The bulk of Q3 revenue was from a gain on the sale the company's remaining interest in 30,000 acre feet of water storage capacity, which it sold for $11.7 million.

The company completed the Fish Springs Ranch pipeline project in July, and now has 8000 acre feet of water for sale. PICO also sold it's first acre foot (one water credit) of Fish Springs water for $45,750. Although this project offers the only new source of water available to developers in the Reno area, the struggling Nevada real estate market has slowed PICO's progress.

Still, PICO remains well capitalized, and has ample liquidity ($140 million in cash, or nearly $7.50 per share)to weather this storm. Debt also remains low at $28.2 million, and the company is currently trading at just .82 times book value, and 14 times trailing earnings.

PICO shares are now down 35% year to date and 55% from the 52 week high ($48.24) hit in early September. The drop is primarily related to the major asset repricing we've been experiencing in the markets--that's a nice way of referring to the great "panic" of 2008.

We've seen many companies punished beyond belief by the forced selling we are still experiencing, and believe that this will ultimately provide some of the greatest opportunities of this generation. That's if you have the stomach for it. Stay tuned.

*The author has a position in PICO Holdings. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.

1 comment:

Anonymous said...

You refer to 2008 as a panic, and indicate that prices are going down due to forced selling. I am not so sure it is so simple. I remember people saying the market was "on sale" when it was 20% off, that it was a steal at 30%, now that the averages near 50% people talk capitulation. Maybe you guys are right and maybe you are not, who knows. However, I think you should at least CONSIDER that the japanese NIKKEI recently hit a level first reached in 1983. So that market has gone absolutely nowhere for 25 years. To think that because we have gone down 50% the market has panicked seems lacking in evidence. If takes another 20 years to get back to 1500 levels for the S&P 500 then I would say these investors made a good decision.

Again, not saying you are wrong, and I like your style of stock picking but I think you are over simplifying the situation.