Sunday, October 31, 2010

The Curious Case of JOE

In following up the recent tempest about asset valuations at JOE, several curious things stand out. For an institutional stock with very concentrated holdings, it seems to have almost no significant Wall Street research coverage. The best known firm I can find is Keefe, Bruyette & Woods, long known for expertise in financial services but not necesarily for real estate. Their analyst is quoted as saying that the points raised by Greenlight Capital are "overdone." Nothing analytical that I can access to back that point up. The S&P report on the company is totally uninformative. If anyone has some current institutional research that they'd like to pass on, I would gladly peruse it.

S&P also lists no peer companies for JOE. The company's proxy report lists many peer companies for executive compensation purposes, and the list includes REITs. home builders, and developers. Plum Creek Timber is one of the largest private landowners in the US, and came out of a similar corporate history to JOE. Yet it is a REIT, and as such paid out $205 million out of some $312 million in CFO for the most recent nine months of the current fiscal year. JOE can't provide such income comfort to its investors, and its story appears entirely on the come.

Neophytes to the stock, like myself, go to the corporate web page and are greeted by references to the Deepwater Horizon incident, the prevalence of tar balls on beach properties, and the suggestion that the company is pursuing litigation to make things right. Huh? Cash out the door, years in litigation, standing in a long queue for a settlement. This is something for an investor to get excited about? The photos of some luxe developments are in stark contrast to those in the Greenlight Capital presentation. How can these contradictions be resolved? A company conference call is scheduled for November 2nd. Hopefully there will be some good Q&A on the call, and we'll all know more.

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