Einhorn Bests Fairholme's Berkowitz as Bet Against St. Joe Ends

  • Greenlight started selling short in 2006, exited last quarter
  • Shares fell 53 percent on average before short sales covered

David Einhorn got the better of Bruce Berkowitz in an almost decade-long bet against St. Joe Co. that ended last quarter.

Einhorn’s hedge fund, Greenlight Capital Inc., began selling borrowed shares of the real-estate developer in 2006 to profit from a drop in its stock price. His short sales put him at odds with Berkowitz, who heads Fairholme Capital Management LLC and was Morningstar Inc.’s fund manager of the decade for the 2000s. Berkowitz started buying St. Joe in 2007, and Fairholme is the company’s largest shareholder.

The chart below tracks St. Joe’s stock performance. The average prices at which Einhorn sold shares short and bought them back, covering the earlier sales, are included. They were disclosed two days ago in Greenlight’s third-quarter letter to investors. The gap between them was 53 percent, an indication of his short-selling profit.

“We decided to declare victory and move on, even though the shares remain somewhat overvalued,” Einhorn wrote. He didn’t elaborate. The New York-based investor’s letter was posted on ValueWalk, a finance website that features hedge-fund commentary.

Einhorn came out against St. Joe publicly in an October 2010 presentation at the Value Investing Congress. At the time, Berkowitz’s flagship Fairholme Fund and other funds he manages had 26.8 million shares of the company, based in Watersound, Florida. Within six months, the Miami-based investor became St. Joe’s chairman, a position he still holds.

While Berkowitz’s holding dropped to 24.5 million shares as of Sept. 30, his stake climbed in percentage terms last month after the company bought back 18 percent of its stock in a tender offer. Fairholme Capital now has 32 percent of St. Joe, which closed yesterday at $21.24.

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