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JOE - Going for 2-1 on JOE
So far, I'm 1-and-1 on bets against JOE: I lost 32% on a JOE short as part of a recent market neutral trade ( http://shortscreen.com... ) and I gained 39% on puts I bought on JOE a few months before ( http://shortscreen.com... ). Today I bought the $25 strike Jan 12 puts on JOE at $4.30.
Einhorn's fundamental short thesis here still seems intact: if you value JOE's real estate using the average sale price of it over the last ten years (which includes the sales during the boom years), the company is worth $10 or less per share. And every year, the company sells off more land to cover its overhead.
Berkowitz has said he'd buy the whole company if he could. Now that JOE has lifted his ownership cap, he can, but I don't think he will. After Berkowitz gets his fill of JOE, what catalyst is there for JOE?
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Those puts are up 38% today on the 8% drop in JOE (below where I bought them, but plenty of time).
CNBC reports (http://www.cnbc.com/id...):
"A source close to the situation tells CNBC Berkowitz, whose mutual fund Fairholme Capital Management LLC, owns 29.7% of the company, is proposing to remove the company's chairman Hugh Durden and three other directors. Under Fairholme's proposal, Berkowitz, would become chairman and Charles Fernandez, President of Fairholme would become vice chairman of the board. Both men are current directors and plan to decline all compensation, including the reimbursement of expenses, until the company breaks even. The source said Fairholme plans to achieve this within six months by cutting $60 million dollars in expenses at St. Joe."
Seems that Berkowitz agrees with Einhorn that JOE has been poorly managed and blowing cash.
JOE is up 14% after hours, on news its exploring strategic options including a sale ( http://www.reuters.com... ). What strategic buyer would be interested in JOE at these prices?
This commenter on JOE's Yahoo message board makes an interesting point ( http://messages.financ... ):
"my guess is the board is trying to slow down berko. he was on his way to taking over the board and cleaning house. they are trying to buy themselves some time."
Substitute current management for "board" and that makes some sense.
Down close to 8% so far today. A real estate consultant touches on the key issue in a Bloomberg article today ( http://www.bloomberg.c... ):
"St. Joe’s market value of about $2.5 billion indicates that its 576,000 acres of land are worth about $4,400 an acre. That is “way too high” compared with what other undeveloped Florida land fetches, said John Burns, chairman of John Burns Real Estate Consulting in Irvine, California
“I’ve got plenty of clients now looking at land,” Burns said in a telephone interview today from Sacramento, California. “And St. Joe’s land is at the bottom, really because you can’t develop or monetize much of it anytime soon.” "
Those JOE puts I bought for $4.30 early this year closed at $7.70 today.
BTW, here is my write-up of Bruce Berkowitz's presentation in NYC last night, in which JOE was discussed. By coincidence, the fellow I was sitting next to in the back turned out to be Berkowitz's #2 Charlie Fernandez, who was kind enough to answer a couple of questions of mine about JOE: http://seekingalpha.co...
Sold those puts today at $11.50, for a 267% gain.