While the broad markets continue to sputter, small and micro caps are quietly enjoying a nice run. Year to date the S&P 500, up 1.6%, is being trounced by both the Russell 2000 Index (+7.8%) and Russell Microcap Index (+11%). That performance is being lost in the sea of worries about where the broad markets are heading overall.
The daily reports from most talking heads remain centered on intraday market swings in the S&P 500 and Dow, presumably brought on by the specter of tariffs and trade wars. Yet, we've experienced just one trading day in the past 19 that the S&P 500 closed at least plus or minus 1%, my simple yet perhaps naïve definition of market volatility. Year to date there have been 36 such occurrences, with 35 happening in the 87 trading days between January 26th and June 1st. All we have to show for all of that volatility is a year to date gain of less than 2%. It's like driving your car aimlessly for days, intending to go somewhere, but ending up right back where you started.
Meanwhile, some interesting news has been lost amid all of the focus on whether or not the markets are ready to take a tumble. Earlier this week PICO Holdings (PICO) , a disappointment over the years, but often referred to whenever the potential value of water rights is mentioned, announced a transaction which deserves notice.
PICO's Vidler Water Company subsidiary announced the sale of 500-acre feet of water rights in Lyon County in Nevada to a residential real estate developer for $10 million, or an astonishing $20,000 per acre foot. Additionally, Vidler subsidiary Fish Springs Ranch LLC agreed to sell 70.52-acre feet of water to a developer near Reno for $35,000 per acre foot. Those are among the higher prices I've seen for water rights and should reinvigorate investor interest which has seemingly waned over the years as public names owning supposedly valuable rights have not successfully monetized them.
Long-time PICO shareholders (I've owned shares on and off since 2002) have waited years for the company to monetize its water rights, and frankly it has never lived up to the hype surrounding its water assets. However, the more important takeaway is what PICO's sale may mean for other companies that possess water rights.
They are often small, quirky companies that have been around for many decades, yet are not well known among investors. These include citrus name Limoneira (LMNR) , and perhaps the granddaddy of them all, the ever-mysterious California cotton farming giant JG Boswell (BWEL) , which has a current market cap of about $675 million, and yields 2.3%. BWEL owns 142,000 acres of land in the Tulare Lake Valley in California, and also has land holdings in Australia; the extent of the company's water rights is not publicly known, but I've seen some wild numbers thrown around in the 16 years that I've been slowly accumulating shares. You won't find much in the way of financial reporting for the company, which is not required to file with the SEC. The best way to get up to speed BWEL is to read about it's history in the fascinating "The King of California: JG Boswell and the Making of a Secret American Empire" by Mark Arax and Rick Wartzman, which I've read three times already.
In any event, PICO's recent transactions should act as a catalyst to renew the debate about the potential value of water rights.