The saying goes something like this: “I have two words for you, ‘real estate‘.” These days, a lot of people may feel that those are actually dirty words. However, there are many different kinds of real estate, and one kind that never goes out of fashion. It’s not residential real estate — not with 25% of the country’s mortgages underwater. Commerical real estate isn’t it, either — not with properties struggling to achieve cash flow. No, the one type of real estate that will always have value is properly-located undeveloped land.

St. Joe Company (NYSE: JOE) owns 577,000 acres of prime Gulf Coast real estate. Founded in 1936, the company has slowly acquired everything from beachfront property, to property on St. James Island, to inland rural land ripe for development. The company doesn’t just sit on that land, though. Some of it remains undeveloped, but it’s found plenty of ways to monetize the rest.

The company has four divisions: Residential Real Estate, Commercial Real Estate, Rural Land Sales and Forestry. The Residential Real Estate division operates some very attractive resorts right on the Emerald Coast as well as other beaches (just check out the website). There are quaint residential communities, also along the beach, which are sparsely populated and remain relatively untouched. The Commercial division develops and sells real estate for just about every type of business: retail, office, industrial, multi-family, mixed use and even hospitality. The Rural side sells undeveloped land from two acres up to 468 acres for development (such as homebuilding), recreation, conservation and for the timber industry. Finally, as its name suggests, the Forestry division focuses on anything having to do with timber, while also doing its part for conservation by managing properties for that purpose.

If it’s possible to more fully diversify a real estate holding, I can’t think how.

The trick with St. Joe as an investor, however, is how to value it. There are two ways to look at a real estate holding company, and both depend on one’s investment time horizon.

Investors looking at St. Joe for a trade or for the short term want to be conscious of where the stock price has been relative to its historical highs and lows, and whether the company is providing solid cash flow and earning money.

For the longer view, which is the way to really evaluate real estate like this, investors should be more forgiving of how the properties are delivering cash flow. Economic hard times, like the present, are more likely to impact all of the company’s divisions. During the very long term, and by that I mean some 30-40 years, that becomes less important. Why? Because it’s real estate. And over time, real estate historically increases in value.

Case in point: The company had net income of $39 million in 2007, but lost $36 million in 2008, and lost $130 million in 2009. However, because of the way the company accounts for costs associated with development, the company actually produced $50 million in cash flow in 2008 and 2009.

The cash flow is great, but unlike rental properties, St. Joe doesn’t need it to pay a mortgage. It has $150 million in net cash on the books. So if you want to own that prime piece of real estate in Florida, you can do it by owning St. Joe stock — and own that property outright.

The stock has had an interesting ride. There was a big run-up from $20 to $80 a share in the first half of the decade, followed by a series of fits and starts, which ended with a crash to $12 in March of last year (along with everything else). Since then, we’ve seen Fairholme Capital Management accumulate a whopping 30% stake in the company, of which 24% is in their Fairholme Fund (FAIRX) mutual fund. They clearly saw the long-term value of the real estate and started buying. One might also take comfort in the fact that mutual fund Third Avenue Real Estate Value Fund (TAREX) owns 3% of the company. Those who follow Third Avenue know their real estate managers are among the top in the industry.

The stock is -15% off its 52-week high, likely because of the Gulf oil spill, which created environmental uncertainty around St. Joe’s property. The situation is fluid (no pun intended) and investors should keep a careful eye to see what develops. Even if the worst occurs and there is damage to St. Joe’s properties, it may still create a great long-term buying opportunity. Time heals all wounds. It healed Alaska’s coastline, and it’ll do the same in Florida.