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St. Joe Shares Popped: What You Need to Know

By Travis Hoium | More Articles
December 13, 2011 | Comments (1)

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of St. Joe (NYSE: JOE  ) jumped as much as 13% in early trading on extremely high volume.

So what: At noon on Wall Street 1.5 million shares had already traded hands, more than twice the daily volume. There are a couple of things driving the stock, including the upcoming options expiration on Friday and a high short interest. An even 63% of St. Joe's float is sold short, making for a quick short squeeze when option volume spikes. That type of short interest can make for wild movements in the days before options expire, like they will on Friday.

Now what: Short sellers have absolutely crushed the stock, but the flip side to that is that they all need to buy back shares eventually. This type of trading movement is why investors should keep a close eye on things like short interest when buying and selling stocks. A short squeeze like we're seeing today may be a short-term driver, but with so many investors betting against the stock, I'm definitely not a buyer today.

Interested in more info on St. Joe? Add it to your watchlist by clicking here.

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Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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  • Report this Comment On December 14, 2011, at 10:25 AM, DiversifyFool wrote:

    Michael Katz, founder/manager of Glenrock was quoted in Barron's over the weekend. It looks like I actually got in lower than him.

    "St. Joe is a misunderstood bargain... owns 573,000 acres of land in northern Florida —or the equivalent of two-thirds of Long Island, N.Y.

    "...2005 enterprise value of nearly $6.6 billion at over $80 a share; whether it was ever really worth that is obviously debatable. But we are confident that it is not worth much less than its current $13 per share, which comes to $1.1 billion in enterprise value.

    "...if we simply value all of its property as mere timberland, and add in its net cash and other assets [including a well-known hotel and a marina], we get to a knock-down value of $12 a share"

    "Most of Joe's land is within 15 miles of the Gulf of Mexico. Last year, a brand-new airport opened on Joe's property, serviced by Delta and Southwest. Of the total, 40,000 acres are "entitled" for development; they are worth at least $30,000 an acre. Another 25% of the acreage has commercial or recreational value, so we think they are worth at least $6,000 per acre.

    "Even if we just value all the rest as timberland, we get a per-share value of about $30. if Florida ever sees another big recovery, the value could be much higher. And it's not out of the realm of possibility that a forward-thinking sovereign-wealth fund could decide to pick up 1.5% of the state of Florida in one single transaction."

    What he doesn't mention is that there has been a management shakeup, and another value fund now has a seat on the board. So, mis-steps should be a thing of the past. Last, they are waiting for a loss-of-income settlement from BP because of the oil spill.

    Not a core holding for me, but something to consider.

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5/25/2012 4:03 PM
JOE $16.54 Down -0.10 -0.60%
The St. Joe Compan… CAPS Rating: **

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