Exploring The Activist Targeted Water Company: PICO Holdings

As sent to Activist Strategy subs last week, River Road Asset Management is active at PICO Holdings, with an 8.8% stake. It has been for a couple months, but this just River Road’s third 13D filing, so it’s a big deal. The company is still rather "undiscovered" - no sell-side research coverage, the company doesn’t do conference calls or offer any real detail in press releases.

The bottoming of housing markets in Arizona and Nevada, and the rest of the Southwest, just hasn’t translated into meaningful growth for its housing-leveraged businesses - the water resource and homebuilding businesses. Missteps with getting into the canola seed business has set the company back as well.

With this, book value declined 30% over the last five years. PICO shares are off 50% over the same period and now trades at roughly 90% of book value. The catalyst is that River Road is the driver for management to monetize its properties and to become more communicative with shareholders. The easiest road to monetization is dumping its real estate and agribusinesses.

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