It's old news but I have different take.
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Say it ain?t so, JOE
www.waltonsun.com
11/6/2010
ST Joe?s (JOE: NYSE) stock price was hammered last month after prominent hedge fund magnate David Einhorn pronounced the company ?way, way overvalued.? Of course, Mr. Einhorn has ?sold short? JOE, and he wants the price to drop. Think of selling a stock short as the opposite of buying. Einhorn famously shorted Lehman Brothers in 2007 and rode the stock all the way to zero.
Einhorn?s presentation ?Field of Schemes: If You Build It They Won?t Come? was greeted with raucous applause and uproarious laughter by the 2010 Values Investing Congress audience. He believes JOE?s land inventory does not reflect current market conditions. Despite JOE?s claim as a land developer, par excellence, Einhorn argues JOE main profit center has always been land sales. With the precipitous decline in land values JOE should be valued at less than $10 per share. Over the last 10 years, JOE has generated more than $700 million (pre-tax profit) from rural land sales. Conversely, the company?s real estate development wing lost almost $100 million over the same period. Is this the ?development expertise? CEO Britt Greene touted at a 2009 Raymond James dog and pony show?
Eihorn deftly pokes more holes in JOE. The company and their bull lackeys argue JOE?s 35,000 acres around the airport carries a value of $2.1 billion, approximately JOE?s valuation, so you get the rest of the company free. Not so fast, the valuable airport property does not belong to JOE rather the airport authority owns it. Furthermore, JOE proposes to lease property (previously donated) from the airport authority. Ed Ball, longtime JOE CEO, must be spinning in his grave. JOE will be leasing property they gave away.
JOE?s jewel is South Walton?s own WaterColor and the company touts their development expertise via WaterColor. Buyers should beware, going forward WaterColor will have little impact on JOE?s profit since WaterColor sales were years ago. For instance, my beloved Georgia Bulldogs 2005 SEC championship trophy is useless in 2010.
Bottom line, JOE owns thousands of lots from Walton County to Jacksonville. These lots are fighting for sales against a tsunami of foreclosures, bank REOs and speculators looking to dump their holdings. JOE also owns thousands of acres better suited for growing pine trees than subdivisions.
JOE has a couple of Hail Mary options. A BP bailout bonanza could be their salvation. Alternatively, management could click their heels together while saying, ?There?s no airline like Southwest? and their problems magically swept away
.
With complete disclosure, in the opposite corner, we find famed value investor Bruce Berkowitz of the Fairholme Fund (Five Stars-Morningstar) which owns 29 percent of JOE. A Berkowitz/Einhorn square off over JOE could be financial equivalent of a Texas death match. If JOE implodes, this duel could be Berkowitz?s Waterloo. Conversely, the same could happen to Einhorn.
What direction is JOE?s stock headed? I don?t know and I don?t care. Investors should realize actively managed funds outperform an index because the fund takes more risk. Hedge funds siphon money through high fees. Owning individual stocks means specific company risk. Give me a diversified portfolio of index funds any day and let me get on with the rest of my life.
You can find Einhorn?s presentation at http:// www.marketfolly. ? com/2010/10/why-david? einhorn-is-short-st-joe? joe.html? .
Buz Livingston is a certified financial planner. He operates Livingston Financial Planning Inc. focusing on hourly financial planning and investment management. Contact him directly at 850-267-1068 or at buz@ LivingstonFinancial. net.
BUZ LIVINGSTON
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Say it ain?t so, JOE
www.waltonsun.com
11/6/2010
ST Joe?s (JOE: NYSE) stock price was hammered last month after prominent hedge fund magnate David Einhorn pronounced the company ?way, way overvalued.? Of course, Mr. Einhorn has ?sold short? JOE, and he wants the price to drop. Think of selling a stock short as the opposite of buying. Einhorn famously shorted Lehman Brothers in 2007 and rode the stock all the way to zero.
Einhorn?s presentation ?Field of Schemes: If You Build It They Won?t Come? was greeted with raucous applause and uproarious laughter by the 2010 Values Investing Congress audience. He believes JOE?s land inventory does not reflect current market conditions. Despite JOE?s claim as a land developer, par excellence, Einhorn argues JOE main profit center has always been land sales. With the precipitous decline in land values JOE should be valued at less than $10 per share. Over the last 10 years, JOE has generated more than $700 million (pre-tax profit) from rural land sales. Conversely, the company?s real estate development wing lost almost $100 million over the same period. Is this the ?development expertise? CEO Britt Greene touted at a 2009 Raymond James dog and pony show?
Eihorn deftly pokes more holes in JOE. The company and their bull lackeys argue JOE?s 35,000 acres around the airport carries a value of $2.1 billion, approximately JOE?s valuation, so you get the rest of the company free. Not so fast, the valuable airport property does not belong to JOE rather the airport authority owns it. Furthermore, JOE proposes to lease property (previously donated) from the airport authority. Ed Ball, longtime JOE CEO, must be spinning in his grave. JOE will be leasing property they gave away.
JOE?s jewel is South Walton?s own WaterColor and the company touts their development expertise via WaterColor. Buyers should beware, going forward WaterColor will have little impact on JOE?s profit since WaterColor sales were years ago. For instance, my beloved Georgia Bulldogs 2005 SEC championship trophy is useless in 2010.
Bottom line, JOE owns thousands of lots from Walton County to Jacksonville. These lots are fighting for sales against a tsunami of foreclosures, bank REOs and speculators looking to dump their holdings. JOE also owns thousands of acres better suited for growing pine trees than subdivisions.
JOE has a couple of Hail Mary options. A BP bailout bonanza could be their salvation. Alternatively, management could click their heels together while saying, ?There?s no airline like Southwest? and their problems magically swept away
.
With complete disclosure, in the opposite corner, we find famed value investor Bruce Berkowitz of the Fairholme Fund (Five Stars-Morningstar) which owns 29 percent of JOE. A Berkowitz/Einhorn square off over JOE could be financial equivalent of a Texas death match. If JOE implodes, this duel could be Berkowitz?s Waterloo. Conversely, the same could happen to Einhorn.
What direction is JOE?s stock headed? I don?t know and I don?t care. Investors should realize actively managed funds outperform an index because the fund takes more risk. Hedge funds siphon money through high fees. Owning individual stocks means specific company risk. Give me a diversified portfolio of index funds any day and let me get on with the rest of my life.
You can find Einhorn?s presentation at http:// www.marketfolly. ? com/2010/10/why-david? einhorn-is-short-st-joe? joe.html? .
Buz Livingston is a certified financial planner. He operates Livingston Financial Planning Inc. focusing on hourly financial planning and investment management. Contact him directly at 850-267-1068 or at buz@ LivingstonFinancial. net.
BUZ LIVINGSTON
