While I've been on vacation for the past week, the investment wheels have never stopped turning, for better or worse. Rather than sleep in like a normal person trying to get away from it all would, I've been up early, typing away like a maniac. There's simply too much going on -- too many interesting situations.
Last week, PICO Holdings (PICO) , a long-time holding off and on, reported second-quarter results. Given the relatively odd structure and focus of the company, quarterly earnings are somewhat meaningless, but there are a couple of recent developments that that are important, as shareholders anticipate that PICO will finally be returning them some capital.
On Aug. 4, the merger of PICO's former subsidiary UCP with Century Communities (CCS) was wrapped up. Most importantly, this added more than $55 million, along with 2.4 million shares of CCS, currently worth $55.2 million to PICO's coffers. That leaves PICO with $92 million in cash.
As the company has simplified operations, focusing primarily on water assets owned by its Vidler Water Company subsidiary, it will be able to, and has made no secret about plans to, return a significant amount of its cash to shareholders. What remains to be seen is whether that will be accomplished via stock buybacks or a tender offer. A special cash dividend seems unlikely.
However the company makes good on returning capital, what remains may still be interesting. The company's significant water assets hold tremendous value (at least that's what we've presumed for years), and as these assets are monetized, it may be able to utilize its approximate $190 million in operating loss carryforwards in order to offset taxable income.
The planets may finally be aligning for PICO to create some shareholder value after years of disappointments, but we'll see.
Elsewhere, one of the very few restaurant names that intrigues me these days, Brazilian steakhouse chain Fogo de Chao (FOGO) , released second-quarter results. The company narrowly beat consensus revenue estimates ($77.8 million versus $77.5 million consensus), but missed on earnings ($0.21 versus $0.23). The now-48-store chain, having opened its latest restaurant in Washington State during the quarter, posted a rise of 0.5% on U.S. same-store sales during the quarter.
In what is an overextended and overpriced sector in my view, FOGO appears to be one of the more reasonably priced names. Consensus estimates for 2018 put the forward price earnings ratio at 13x. Still, I am watching and waiting. Shares are down more than 13% since the company announced a secondary offering in May at $14 a share, and my concerns about the sector as a whole keep me cautious.
I recently closed a successful position in special situation Bob Evans (BOBE) , which sold off its restaurant business in order to focus on prepared foods. After years of watching, I also initiated a position in Mediterranean food chain Zoe's Kitchen (ZOES) , which has been beaten up over the past year. If it can get its act together, it is one of the fresher concepts in casual dining.