There have been an interesting run of investment teasers for various water-related companies lately, since this seems to be a pretty trendy investment theme … after all, everyone knows the supply of fresh water has been sinking and demand growing as the population expands globally. There’s even at least one Water ETF now, so perhaps we’re at the crest of the water-mania wave.

And this teaser comes to us from Karim Rahemtulla, who would naturally like you subscribe to his Xcelerated Profits Report to get a copy of his special report, “Pocket 381% on the Company That’s Turning Water Into Profits.” This is another one of those newsletters that seems unusually cheap, at $49.50 … you have to wonder how this little part of the economy works, are the extremely expensive newsletters any better than these surprisingly cheap ones? What do you get for $50 that you don’t get for $3,000?

But anyway, I don’t want to pony up even $50 just to find the name of this water company … so let’s look at the clues.

First we get the hard sell on water — you’ve probably heard some of this, but the key for this company is that it’s holdings of water rights are in the Desert Southwest, primarily in Nevada … and it’s quite clear for anyone that’s seen Chinatown or visited Las Vegas that demand for water in the desert is strong and getting stronger. So that’s a few pages of the ad, but I’ll just stipulate that I agree water in general is a good investment — what’s not to like about buying something that’s scarce?

So what are we told about this firm?

“This is perhaps the most profitable company my team and I have ever uncovered – and yet it’s one of the safest opportunities I’ve ever come across…”

“At water valuations from 2001 – six years ago – the company is already worth twice its book value. And companies just like it on the S&P are trading at three times that multiple. When the news of this deal goes public in 23 days, a jump of 381% is inevitable.”

That deal in question involved water rights for three areas in Nevada, one in particular that is just now being developed.

Some specifics:

“this company owns an astounding 134,130 acre-feet of water rights.”

“Since 1994, this company has paid between $35 and $50 an acre for land and water. Today, these rights are estimated to be worth more than $1.1 billion – money completely off Wall Street’s radar.”

“This company has the only private water-storage facility in Arizona, with the capacity to store 1 million acre-feet of water.”

“And if all this wasn’t enough… The company still owns 541,000 acres land stocked with water rights. And the company recently filed applications to pump 50,600 additional acre-feet of water rights.”

The company actually began life in the insurance business, and used the free float from their insurance operations to buy up water rights (along with some other businesses).

So what is this little water company in Nevada that Karim thinks is going up at least 300%?

It’s quite a unique company, so anyone who has come across it (including me and a few of my readers) is likely to recognize it from these clues, but for those who haven’t had the pleasure this is …

PICO Holdings (PICO)

This is an insurance runoff and investment holding company that has evolved into a major landowner with a large portfolio of water rights. They are a long-time favorite of the value investing crowd, since the land and water are carried on the books at very low prices, and they have a significant portfolio of other valuable investments as well, including a Swiss mountain railroad. The general idea is that the water rights, the land, their runoff insurance holdings, and their other investments are worth far more than their current stock price.

I wouldn’t pay too much attention to the company’s earnings if you’re interested in this one — they often don’t earn much at all, and their earnings are always very lumpy on land and water sales that are highly irregular, if you’re interested in buying this one the key should be not the PE, but what you think all those investments of theirs, especially the land and water, are worth (I definitely don’t have an answer for that one).

This is still a tiny company, with a market cap now around a billion dollars after a major offering at the beginning of March that pulled the shares down a bit (the offering was at $37, a significant discount to the price then and now — today it’s in the mid-40s).

If memory serves, they were also mentioned by Jim Cramer a few weeks ago when he talked about water investing, so it’s hard to call them really “undiscovered.”

The division of PICO that’s of particular interest here is Vidler Water, so if you’re doing your research on the deals they’ve made in Nevada recently Vidler will probably be the name that pulls up the interesting results. The big deal they mention in the tease is, I think, a deal for water rights to make possible the development of Coyote Springs in Lincoln County, Nevada — that was in permitting last I saw, so a “23 day” timeframe makes some sense.

For more on this company, you can check out one of my favorite investment blogs — Cheap Stocks has been an owner for some time and he writes about them on occasion. (Don’t forget to come back to the Gumshoe when you’re done!). As I said, this has been from time to time a big favorite of the Graham and Dodd value types, so you’ll also see a fair number of articles on PICO over at the Motley Fool, among others.

I can’t tell you whether or not PICO holdings is still a good deal — but they do own a tremendous amount of acreage in a fast growing part of the country, they have proven that management takes a very long view in developing a Grahamian undervalued investment portfolio, and they do indeed have a big water pipeline project and some water rights sales underway right now to feed Carson City, the northern valley of Reno, and the aforementioned Coyote Springs. It’s probably at least worth a look, if you ask me (not that anyone should).