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By Jonathan Chen

Yesterday the SEC announced it was inquiring into the accounting practices of The St. Joe Company (NYSE:JOE) regarding whether it needs to take write downs on it assets.

David Einhorn talked about this at the Value Investing Congress in October, saying he believes the company is worth materially lower than where it's trading now. Immediately after the presentation, shares plummeted on this news, and Bruce Berkowitz, of Faireholme Capital immediately came out and said he wanted to give him a box of chocolates for the free press on the company.

Since the presentation, shares have climbed about 11%, as investors continue to believe that Berkowitz is winning this battle of the hedge fund hot shots.

Shares were down initially Wednesday after the press release about the SEC inquiry, but why did the stock close up if investors thought the inquiry had any merit? It's because they don't. The market can be wrong a lot of different times, but not when so much money is being thrown at this name, and from so many different angles.

St. Joe's has become a high profile stock since the presentation, and many just believed that Einhorn was right about it, as he had been with Lehman Bros. What Einhorn didn't realize is that real estate is local, and in order to properly assess the value of the company, you can't just look at Google Earth. He had people on the ground there, but you need to actually experience and live there for a while before you can get a true sense of the real estate market. You need to actually be there. Berkowitz is located in Miami. I would think Berkowitz has a better idea of how Florida real estate is going than someone in a hedge fund in the Northeast.

Einhorn was right in the name for a couple of weeks, as investors bailed on the name, and shares continued to push lower. Berkowitz looks to be winning in the long term, as fundamentals trump the short term scare.

This is not an attack piece on Einhorn, just pointing out that he's not always right. He still has Apple (NASDAQ:AAPL) to look at in his portfolio. That's certainly not a bad trade off.

Source: David Einhorn Is Wrong About This Joe