5. David Bests Bruce
Now that we have reached the denouement of the very dumb battle between Wall Street bigwigs David Einhorn and Bruce Berkowitz, it's time for us to declare a victor. So raise your glasses everybody, and together let's toast Greenlight Capital's Einhorn and his supremely prescient call regarding the real value of St. Joe's (JOE) property.
(Um, you know what? On second thought, maybe we ought to hold off on the celebratory drink and send Einhorn a congratulatory card instead. The hedge fund manager may be swearing off alcohol for a while after getting tagged last week with an $11.2 million fine by the U.K.'s financial regulator for trading on inside information in British pub-owner Punch Taverns.)Anyhow, while everybody else sat intoxicated by Bruce Berkowitz's grand designs -- and valuations -- for his less-than-grand Florida holdings, Einhorn soberly saw through his silliness and now it's really paying off. Last Friday, St. Joe announced it was writing down $375 million in assets as a result of its new cost-cutting real estate strategy. Over the past year, St. Joe's stock has sunk 40% in value, while Berkowitz's once renowned Fairholme Fund (FAIRX), which holds more than a quarter of Joe's outstanding shares, has dropped 25%, bleeding billions in assets along the way. Just to quickly recap, Einhorn skewered the company in an October 2010 presentation reminiscent of his Lehman called-shot. Nevertheless, instead of reassessing his position in the wake of Einhorn's highly detailed bearish argument, Berkowitz not only called Einhorn's bet, but raised the stakes by gobbling up more and more shares of the Florida landbank. That's right. Berkowitz, who was once hailed as Morningstar's mutual fund manager of the decade, tried to go over the top against Einhorn, who, as luck would have it, just happens to be a world class poker player. Had Berkowitz possessed even a slightly strong hand in St. Joe, then perhaps he may have prevailed. Alas, Berkowitz was holding bupkus and, as last week's news makes even clearer, the fund manager was obviously too proud to lay down his hand after Einhorn called his bluff. "Today's news confirms our view that St. Joe's land is worth less than they thought and that it can't be developed profitably," said Einhorn in an emailed statement to the WSJ. So once again, cheers to you Einhorn. But don't become too drunk with your own success, otherwise you may end up in a truly regrettable pissing match. Just like Bruce Berkowitz.
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