PICO Holdings, Inc.

In Issue 14 of the Oddball Stocks Newsletter, we had a writeup by Nick Bodnar about an Oddball company called PICO Holdings. There was an activist campaign, a special dividend, and the board of directors of the company is now in much stronger hands - and it is in liquidation mode.

In the past, we have described PICO as a "rare Oddball that combines a sum-of-the-parts cheapness, a catalyst, appropriate management incentivization (bonus formula of a time value of money charge against invested capital), and even ongoing share repurchases." As they have disclosed,

Any significant additional monetization proceeds [are] anticipated to be returned to shareholders through tender offer, and/or open market repurchases, and/or special dividends depending on facts and circumstances existing at the time of monetization

The executives of the company are incentivized to wind down the company with a bonus formula that provides for a time value of money charge against invested capital. Yesterday (January 31st), PICO put out a press release with an update on its share repurchase program:

PICO Holdings, Inc. (Nasdaq: PICO) announced today that its Board of Directors has approved the repurchase of up to an aggregate of $100 million of its common stock which would be made from time to time on the open market at prevailing market prices or in negotiated transactions off the market, as capital becomes available.

The Company's Board of Directors had previously authorized in November 2015 an aggregate of $50 million for its stock repurchase program and to date the Company has repurchased 3,494,443 shares for approximately $38.9 million.

We also saw an interesting (provocative) comment on this announcement on the Corner of Berkshire and Fairfax message board:

Lost amongst the pandemonium Friday after the close PICO announced and expansion of its share repurchase program. PICO is a bad investment and basically a slow liquidation play at best, but they've been remarkably consistent repurchasing their shares at prices averaging mid 10s and even 11s. With firepower authorization equal to basically half of the current market cap and ~$60M remaining plus a lot of bag holders with no interest selling shares around here, buying at/around/under $10 seems like a pretty reasonable and safe trade, even if its only for a few percent back to this mid 10s. This has no correlation to all the current hysteria either, and really only relies on the continuance of the status quo in Vidlers core markets.

We do not know what makes this particular commenter believe that PICO is a bad investment, although there are certainly risk factors. The biggest concern with PICO would seem to be that its investment in the 35 mile long water pipeline from Fish Springs Ranch to Reno, Nevada needs new home development there in order to be monetized, and as they say: "To date, we have sold only a small amount of the water credits, and we cannot provide any assurance that the sales prices we may obtain in the future will provide an adequate economic return, if at all."

In Oddball Stocks Newsletter Issue 24, we published an extensive piece on PICO Holdings, and have written other updates subsequently. If you are curious about PICO Holdings and you are not already an Oddball Stocks Newsletter subscriber, a back issue of Issue 24 would be a research starting point. (Don't miss our most recent Issue 28 and other back Issues, either!)