Should You Avoid The St. Joe Company (JOE)?

At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not The St. Joe Company (NYSE:JOE) makes for a good investment right now.

Is The St. Joe Company (NYSE:JOE) an excellent stock to buy now? Hedge funds are turning less bullish. The number of long hedge fund bets went down by 3 in recent months. Our calculations also showed that JOE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). JOE was in 9 hedge funds’ portfolios at the end of the third quarter of 2019. There were 12 hedge funds in our database with JOE positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

FAIRHOLME (FAIRX) Bruce Berkowitz

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a gander at the latest hedge fund action surrounding The St. Joe Company (NYSE:JOE).

What does smart money think about The St. Joe Company (NYSE:JOE)?

At Q3’s end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards JOE over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is JOE A Good Stock To Buy?

Among these funds, Fairholme Capital held the most valuable stake in The St. Joe Company (NYSE:JOE), which was worth $451.2 million at the end of the third quarter. On the second spot was GAMCO Investors which amassed $24.2 million worth of shares. Renaissance Technologies, Royce & Associates, and GMT Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Fairholme Capital allocated the biggest weight to The St. Joe Company (NYSE:JOE), around 94.99% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, designating 0.2 percent of its 13F equity portfolio to JOE.

Since The St. Joe Company (NYSE:JOE) has faced falling interest from the entirety of the hedge funds we track, it’s safe to say that there were a few hedge funds that elected to cut their full holdings last quarter. Interestingly, John Overdeck and David Siegel’s Two Sigma Advisors dropped the largest stake of the “upper crust” of funds followed by Insider Monkey, worth about $0.6 million in stock. David E. Shaw’s fund, D E Shaw, also dropped its stock, about $0.3 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 3 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as The St. Joe Company (NYSE:JOE) but similarly valued. These stocks are Encore Capital Group, Inc. (NASDAQ:ECPG), Apogee Enterprises, Inc. (NASDAQ:APOG), ePlus Inc. (NASDAQ:PLUS), and H&E Equipment Services, Inc. (NASDAQ:HEES). This group of stocks’ market values are similar to JOE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ECPG 10 65147 2
APOG 12 130115 0
PLUS 12 43114 0
HEES 13 52420 1
Average 11.75 72699 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $503 million in JOE’s case. H&E Equipment Services, Inc. (NASDAQ:HEES) is the most popular stock in this table. On the other hand Encore Capital Group, Inc. (NASDAQ:ECPG) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks The St. Joe Company (NYSE:JOE) is even less popular than ECPG. Hedge funds clearly dropped the ball on JOE as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on JOE as the stock returned 10.9% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.