Is Bruce Berkowitz Early or Wrong With His Wager on St. Joe?

  • Fairholme Fund investors pulled $2.6 billion since end of 2014
  • Manager's mutual fund trails 99% of peers over 5 years

Money mangers like to say they aren’t wrong, just early. But is there a statute of limitations on making such a claim?

Consider the case of Bruce Berkowitz’s investment in St. Joe Company, a real estate firm in northwest Florida. Berkowitz, manager of the $2.8 billion Fairholme Fund, acquired most of his stake in the business between the fourth quarter of 2007 and the end of 2009, when the stock sold for an average of about $30 a share.

St. Joe today sells for about $15 a share. The Standard & Poor’s 500 Index, including reinvested dividends, has almost doubled in value since the end of 2009.

Investors are fleeing Berkowitz’s fund, which is down 18 percent in the past year and trails 99 percent of peers over the past five years, according to data compiled by Bloomberg. Clients have pulled $2.6 billion since the end of 2014, including $655.5 million in December and January of this year, according to Morningstar Inc.

Fairholme Capital Management is the largest shareholder in St. Joe. The real estate company’s revenue hasn’t recovered in most years since the time Berkowitz began buying shares prior to the 2008 housing crash.

Paul Scarpetta, a spokesman for Fairholme with Sard Verbinnen & Co., declined to comment on St. Joe.

Berkowitz, who was named Morningstar’s domestic stock manager of the decade in 2010, hasn’t lost his enthusiasm for the real estate investment. In a year-end letter to shareholders posted on Feb. 2, he said the intrinsic value of St. Joe is substantially higher than the current market price.

“While holding our investments, we may appear wrong for extended periods, and in some instance, it can take years for a position to become an overnight success,” he wrote.

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