Real Value in Florida Real Estate?

04/22/2005 12:00 am EST

Focus:

Jim Collins

Chairman and CEO, Insight Capital Research & Management, Inc.

Jim Collins is a specialist in momentum investing, using a complex screen that searches through thousands of stocks to isolate those issues showing the strongest patterns of relative strength and earnings growth. His latest buy is a Florida real estate play.

"The St. Joe Company (JOE NYSE) is a real estate operating company and one of the largest private landowners in Florida, owning about 820,000 acres. The majority of its land is located in the Northwest part of the state. Its acreage includes hundreds of miles of frontage on the Gulf of Mexico, bays, rivers, and waterways, with nearly 40 miles of Gulf coastline, including five miles of beachfront property. The company is also engaged in commercial and industrial land sales, and real estate services.

"The company’s resort operation, which was 65% of 2004 revenues, develops and sells home sites and homes in primary and vacation communities on company-owned land. Management has reported increased consumer interest in Northwest Florida. In February, the company announced that their first resort releases of the year, in the WaterColor and WaterSound Beach communities, sold out of all available home sites, at prices of about $1 million per home site. The firm also reported selling out its lower-priced RiverCamps on Crooked Creek project, with average seling prices of $276,000 per site.

"For the quarter ended December 31, 2004, St. Joe reported earnings of $0.37 per share, an $0.11 increase from the year-ago quarter. Revenues grew 29% to reach $291 million. We caution that St. Joe’s operatons are highly concentrated in one region and the real estate industry is cyclical and impacted by interest rates changes. Meanwhile, management has targeted earnings per share for the full year 2005 in the range of $1.35 to $1.50 per share. The stock has performed strongly since bottoming at $36.86 last May, rising 79% for the rest of the year. Year to date, the shares have risen another 13%. The company receives an A rating for accumulation and distribution and has a relative strength rank of 94 out of a possible 100."

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