Evaluating Two Real-Estate Companies

The potential for Howard Hughes's properties is huge, and its stock is cheap. But St. Joe Company has little value, and its shares are too expensive.

We have positions in two real estate companies, Howard Hughes Corp. and St. Joe Company, that on the surface appear to be similar. Bill Ackman, of Pershing Square, and Bruce Berkowitz, of Fairholme Fund, both highly successful value investors, chair Hughes and St. Joe, respectively, and have enormous stakes in the companies. Both firms are developing properties that are potentially valuable but currently generate little cash flow. But that’s where the similarities end for us. Hughes (symbol HHC) is one of our largest holdings, and St. Joe (JOE) is among our biggest short positions.

Undervalued Assets

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John Heins
Contributing Editor, Kiplinger's Personal Finance