The plot has thickened at PICO Holdings (PICO) , a name that I owned for several years, dating back to about 2002. Through a combination of bad business decisions and questionable management compensation, the company squandered resources over the years and lost credibility with the value crowd, myself included. After years of continuing to follow the story, post-sale, I recently initiated a new position.
Land holdings and water rights were the assets that attracted me to PICO in the first place; however, the company's focus on growth in book value per share instead of earnings made it difficult for some investors to wrap their heads around PICO. The company not only failed at its mission to grow book value, which fell from about $28 a share in 2009 to the current $14.58, it also made some terrible decisions. Chief among the bad moves was entering into the canola oil business; although PICO sold its interest in 2015, it cost the company (and shareholders) millions.
Overpaid management was another issue; from 2013-2015, the longtime president and CEO John Hart averaged more than $3 million per year in total compensation. In 2016, his base salary was lowered from $2.176 million to $1 million as activist investors took aim at the company.
Last week, a couple events happened that may signal a new day at PICO.
First, last Monday, the company sold some Colorado oil and gas assets for $10.2 million; it's another step in the process of monetizing assets. Then on Wednesday, Hart was fired. The move will cost the company $11 million in termination payments, yet it is another step forward (or perhaps given the amount of the payout, two steps forward, one step back).
The market, which for the most part has ignored PICO, liked what it saw last week as shares hit the $12.50 level, a one-year high. It is doubtful, however, that PICO ever will see the $48 level the shares saw in 2008.
Now it's wait-and-see time in terms extracting value from the company's two major assets -- a 57% interest in UCP (UCP) , a land developer and home builder, and the potential gem, wholly owned Vidler Water Co. Vidler owns various water assets primarily in Nevada, but also in California, Colorado, Arizona, and New Mexico.
PICO currently trades at 0.85x book value per share, and time will tell whether the company will take additional steps to maximize shareholder value.