This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Misunderstood Stocks Can Stay That Way for Years

The company went whole hog into the agriculture business in 2010 via its new canola oil and canola meal business, PICO Northstar Hallock, which is now in full production. While early results for this business have been disappointing, as canola crush margins are at ten-year lows, the future appears to be much brighter.

PICO's balance sheet remains strong, and the company ended last quarter with $67 million in cash, and $49 million in investments (debt and equity securities). The company currently trades at just 1.12 times book value per share.

The question is why shares have not performed better over the past several years, and why this company seems to be the perennial small unknown but "must own" company, yet never quite delivers. The answer, in my view, is at least partially due to PICO's inability to deliver consistent earnings. In fact, PICO has not had a positive bottom line on an annual basis since 2008. Confusing the issue is the fact that management does not measure success via earnings but rather growth in book value per share, which is a foreign method to many investors. Furthermore, book value has fallen four consecutive years, from $27.84 in 2009, to $19.98 at the end of last quarter, so the markets are discounting PICO until the company can show something positive.The canola business should ultimately deliver some stability to earnings, but until it is able to, investors may remain skeptical. PICO Chart PICO data by YCharts

And so it goes, the value investors great dilemma; a company with seemingly valuable assets that has difficulty delivering, and remains "misunderstood" eleven years after I took my first position.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
At the time of publication, Heller was long PICO.

Jonathan Heller, CFA, is president of KEJ Financial Advisors, his fee-only financial planning company. Jon spent 17 years at Bloomberg Financial Markets in various roles, from 1989 until 2005. He ran Bloomberg's Equity Fundamental Research Department from 1994 until 1998, when he assumed responsibility for Bloomberg's Equity Data Research Department. In 2001, he joined Bloomberg's Publishing group as senior markets editor and writer for Bloomberg Personal Finance Magazine, and an associate editor and contributor for Bloomberg Markets Magazine. In 2005, he joined SEI Investments as director of investment communications within SEI's Investment Management Unit.

Jon is also the founder of the Cheap Stocks Web site, a site dedicated to deep-value investing. He has an undergraduate degree from Grove City College and an MBA from Rider University, where he has also served on the adjunct faculty; he is also a CFA charter holder.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
PICO $10.01 0.81%
AAPL $93.66 -0.09%
FB $118.57 0.84%
GOOG $698.30 0.76%
TSLA $241.82 0.44%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs