James,
>I have sold 85% of my St. Joe shares in the last two months,
> not entirely because of my market view.
Can you tell why?
Here's my ramblings about SJP's future. It's a cheap
real-estate play assuming real-estate is still on a boom track.
The management will try to get the company going. If they fail,
they may squander company's cash hoard in the process. Is it
possible to notice the failure? Hmmm... They develop the land
into sellable estates and have an infant entertainment division.
It's difficult to check whether they are squandering resources
on development, because that won't show on the valuation records.
(They bought a developper-contractor company, so SJP pays itself
to develop the land, but such deals have perils of vertical
integration and conflict of interest. They also bought a realtor,
which is another vertical integration move.)
It would possibly improve the value of company's land holdings,
but these holdings are on books at 19XX prices anyway. So the ROI
is totally unclear - i.e. they spend $X mln on development and
land value increases by unknown percentage - what's the ROI?
It's even unclear how you decide the valuation increase.
Open market price of X mln. acres of land?
Now SJP's entertainment division is an attempt to get into
theme park business. I have my reservations about the field.
DIS may get profit from DisneyLand, but EuroDisney was a failure.
I don't know if Anheuser-Busch gets much profit from their
theme parks. Golf courses for profit? Hmmm... I am afraid that
it's gonna be an uphill fight.
So in the summary, it would be better if they did
nothing, just sold the whole company or sold parts of the land
that would get good prices now. Owning and developing
real-estate is a lousy business unless you hit Silicon Valley.
If it was an easy and simple call, Buffett (or KKR) would own
half of America. BTW, owning your own house is
different because of tax benefits, reduced renting expenses and
socio-pshychological reasons.
Of course, if they have good timing and come out with
developed estates when real-estate is booming, the stock
may explode. The same would happen if the entertainment division
is successful or successfully hyped. But I would not buy on
these assumptions. I'd rather buy a real growth story -
see my next post. :-)))))
Good luck for all
Jurgis |
