St. Joe is Whitney Tilson's Largest Short Position, Berkowitz Wants $JOE As Largest Position

T2 Partners VIC slides (see below) 
Keep an eye on the St. Joe ($JOE) value war. Now value manager Whitney Tilson, of T2 Partners, has joined the fight. Tilson told CNBC's Fast Money on 5/3/2011 that St. Joe was his largest short position and that $JOE "is worth half to a third" of its current price. JOE was trading around $26 that day, so $8.6-$13 per share? He joins hedge fund manager David Einhorn, of Greenlight Capital, who released an extensive research report last October explaining why $JOE was worth $7 to $10 a share. According to David Einhorn's Q1 Investor letter, Greenlight Capital was still short JOE shares. JOE is currently trading at $21.85, so decent timing so far.

Here is what Whitney Tilson said on CNBC. Watch the video after the jump.

On a potential sale:
JOE inflection point
"I think there was a flurry of activity to try and sell it but given the stock is trading at two or three times what we think it's really worth, and how depressed the real estate market is and so forth, we think there's almost no chance of the company getting sold."

St. Joe should be valued based on timberland assets:
"Basically they have 500-plus thousand acres of timberland that's worth $7 to $10 a share, and then they have a bunch of beautiful developments that were built at the peak of the market that are basically most of them are ghost towns at this point. The bubble burst and they're largely empty. and that is these developments which we think have virtually no value, nor will they ever, account for being valued in the marketplace. well over $1 billion and we think there's almost no value there."

Impairment charges needed:
"Sales prices of some of the lots and houses that are being sold are being done at, you know, 10% or 20% of the peak valuation. Yet St. Joe hasn't taken any impairments on these assets and we think they're going to have to."

And then there's the long side. The Fairholme Fund, run by Bruce Berkowitz, owns about 30% of the company and wants to own more. From Institutional Investor on 5/19/2011:
"Fairholme’s logic is relatively simple: St. Joe’s fortunes will rise again when real estate does; the land was purchased cheaply, paying them to wait; the new airport, on land donated by the company, will spur development in the Panhandle; and new company management will help. With Northwest Florida Beaches International Airport opened last May, the region should be able to develop not just as a vacation spot but as a commercial hub, Berkowitz contends."

"Although St. Joe currently represents less than 3 percent of Fairholme’s assets, Berkowitz hopes to make it a more significant holding. “Our game plan will be to make it a bigger part of the portfolio,” he says. “We’re not wasting our time or our shareholders’ or partners’ time. I hope one day St. Joe is our largest position.”"

Other large mutual funds and institutions bought a huge chunk of shares recently. I addressed this in my previous blog post on 4/24/2011:
Joe Ownership via Fidelity Magellan (FMAGX) disclosed that it owned 7.4% of the company in a March 31, 2011 13G filing (Fidelity owned 11.4% in total), BlackRock owned 17.69% of JOE in total (13G filing), Fairholme Fund (FAIRX) owned 28.86% (13D filing), T-Rowe owned 11.2% (13G filing) and the Janus Contrarian Fund owned 8.8% of JOE (13D filing). Janus Capital Management owned 13.2% of JOE in total.

Here is an interesting chart showing St. Joe's price/book ratio versus revenues over 10 years courtesy of You can see they move in tandem. JOE's price/book ratio was 12.26 when revenues hit 259 million when real estate peaked in June 2005. JOE is now trading at 2.29x book with 73.44 million in revenue (ending March 31, 2011). During the first quarter, St. Joe recorded $14.10 million in net income and $73.44 million in revenue mainly due to a $50.3 million timber deed sale (Forbes). Out of the $889 million in shareholders equity, $216 million was cash on hand. Book value per share was $9.60 (second chart). It will be interesting to see if impairment charges affect quarterly numbers going forward.

St Joe Stock Chart by YCharts

St Joe Stock Chart by YCharts

T2 Partners Presentation Value Investing Congress 5-3-11 New

Original source via

This is somewhat related: Georgia suffers record timber loss in storms, fires (5/24/2011, Atlanta Journal)

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