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JOE - Window Dressing for Ugly Kid Joe today?
The St. Joe Company owns a swath of undeveloped real estate in the Florida panhandle. The most prominent long investor on this one is Bruce Berkowitz, who's arguably the best long-only equity value manager* seems to have a soft spot for Florida real estate.
A Florida resident himself, Berkowitz cited Sears's Florida real estate as part of his bullish case for that stock too. The pseudonymous blogger Greenbackd, who is long JOE, offered a summary of Berkowitz's long case for JOE and David Einhorn's original short case for it a couple of days ago ( http://greenbackd.com/... ). I don't know if Einhorn has updated his short thesis since '07, but I'd guess that he his estimate of the value of JOE's real estate would be even lower now.
I saw earlier today that JOE was up a little under 5%, which I assumed to be window-dressing (when money managers buy more of stocks they already own at the end of the quarter to make their quarterly numbers look better). So I picked up a few of the DEC $25 puts on JOE at $3.80.
*Seth Klarman is probably better, but (or perhaps, because) he has the freedom to eschew stocks when he is bearish. Today his stock exposure is about 10%.
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FWIW, Cramer devoted about 10-15 minutes of a show last week telling people to stay away from JOE at all costs.
I don't know what JOE intends to do with its property, but the Panhandle is a lot different than the rest of the state. I have a hard time seeing it as a hotspot for much of anything. When I've spent time there in the past, the area seemed a bit backward.
Greenbackd quoted a summary of Cramer's take on JOE at the link too:
With oil continuing to gush in the Gulf of Mexico, one obvious stock to put on the Sell Block is St. Joe, a property developer in Florida, 70% of whose properties sit on the “now imperiled coastline.” The positives just don’t matter; the company bought 577.000 acres of land at a rock bottom price, is expanding beyond luxury properties into commercial real estate and is suing BP (BP) for damages. If tar balls show up on beachfront property no one will want to buy.
If this is such a clear sell, why is Cramer singling JOE out? Because three analysts rate the stock as “neutral” and one says it is “undervalued.” Cramer has three words for that analyst: “Sell, sell, sell.”
“St. Joe down 40% off the oil spill isn’t an opportunity,” Cramer said, “it’s a falling knife and it will be able to cut you unless we get some certainty, some clarity about the scale of the damage.”
I think it was Berkowitz himself who said some called the Panhandle "Lower Alabama" or something like that.
One thing I remember from passing through Pensacola on a ride from New Orleans to Daytona onetime was not so warm in the panhandle in March. The Gulf was cold and it was cool at night. If a snow bird is willing to move a thousand plus miles to avoid the winter, why not go little further south to somewhere on the peninsula that's actually warm all winter? It's not like there aren't deals in South Florida now with the real estate bust.
Resisting the urge to over think things, I think the situation is pretty simple: Berkowitz got neck-deep in Florida real estate at the beginning of the biggest real estate bust in this country's history.
Perhaps it's not a coincidence that the last boom and bust of anywhere near this magnitude in FL real estate occurred in the Roaring Twenties/Great Depression.