SHLD
Since 2003, SHLD is up 808%. S&P 500 is up 56%. WMT is down 18%. TGT is up 86 %. JCP, the other turnaround, is up 298%. But SHLD shares have fallen about 27 percent in the past quarter as the company preannounced a bad quarter and has been caught in the ”hedge funds are bad” philosophy that has permeated the street as taxation issues and bad subprime bets come to the surface. As Cramer himself said the other day on TheStreet.com TV, sell the stock. Get out of it today….if you can’t take the heat. But he is not selling, and neither am I.
I for one never expected a great “Retail Renaissance” at Sears Holdings, with both Sears and Kmart being able to grow back into prominence as they were in the early to mid 1900’s. To think that would be a fool’s game. What has happened is about what I expected with the two companies. With Kmart, Lampert took a bankrupt company that was bleeding money and turned it into a cash creator. With Sears, Lampert has been trimming back the fat of 100 years of business in the attempt to make the company a cash creator as well. When Sears sold it’s credit card operations in 2003, many thought that would be the death knell for Sears as more than 2/3 of it’s profits came from owning it’s own card. However, by owning it’s credit porfolio it was subjected to much greater risk and as the sales continued to slide the cost to pay the interest to Sears bondholders became too great. After “merging” Kmart and Sears, Lampert has been able to leverage some costs and Sears has become viable on it’s own by just selling goods and services.
So, now under the Sears Holdings banner, Lampert has two companies that are creating cash. But he has done nothing else that was expected of him when he “merged” the two companies…selling of real estate or closing huge numbers of stores. There have been no purchases of other businesses with the cash being created by the retailers. He has shunned the business press and analysts by not providing monthly sales updates and only speaks to them at the annual meeting. So it seems as if the only way to value the stock is through retail sales with an added bump for the Eddie Lampert premium given to him as a result of his 20 plus years of investing performance. So as sales continue on their downward trend and no Lampert magic has occured yet, you get the latest performance. Interestingly enough, the shares have not been trading at a much greater rate than their normal volume (no fire sale if you will) and Lampert had about 1.5 billion dollars with which the board authorized him to buyback stock. He is getting that stock on sale right now. In fact, there has been a bluelight special on SHLD stock for about 2 months.
Take a step back and look at the stock of Berkshire Hathaway, Warren Buffett’s company. Some have speculated, including your’s truly, that Lampert would like to create his own version of that company. In 1965, Berkshire started trading at around 14 dollars a share. On July 27, 1977 it was trading at 100 dollars a share. 30 years later on July 27, 2007 the stock traded at 110,000 dollars a share. Sometimes it pays to be patient.
gurusteve
E the Wise
DFV the Scribe
pg - your humble messenger
hairybeast
thompaine
Drowning Creek
Well stated, Steve.
Truth be told, I couldn’t begin to match wits with the Guru on investing, and I’m not trying to. I know just enough about investing to know that I’d trust Steve the Guru to invest my life savings. You know, if I had life savings.
I have such confidence in ConClub’s resident financial advisor that I’ve recommended for years, to everyone I know, to buy Sears stock. When I first made my bold suggestion, Sears was at $62/share. Recently it hit $192, before sliding back to its current $136.
Bottom line: All who listened to my recommendations to follow Steve’s advice made lots of money, those who didn’t lost a chance at lots of money.
According to the Guru, it’s not too late, and it looks like now might be an opportune time to buy.
Does the Guru have any advice for what I can do with the $15.45 I have burning a hole in my savings account? Lets get aggressive here! Great post though and as always, I defer to your wisdom.
7,16,29,42,43,49 Powerball 26 with 1 dollar.
Save another 11 dollars and open up a 529 plan for your children’s education.
What’s your take on the current situation with the market as a whole? Is the long-rumored 10% correction coming? Is a recession in the cards? I’ve been mostly waiting out this last big push because the market still seems pretty shaky, but am I just being overly cautious?
Wes, it always pays to be cautious, especially in this market environment. My take is that the subprime mess has been getting somewhat overplayed by the bears, to great advantage last week and we certainly haven’t heard the last of that situation. August can be very volatile as it is “vacation month” on the street and the lack of overall volume can cause some rapid fluctuations in the market. It is hard to argue against the global growth story, however, with the number being around 6% for the year. If another bear raid or two happens then foreign investors are likely to step in and start buying newly cheap stocks. Plus there is a lot a cash on the sidelines right now that is ready to be redeployed if interest rates were to tick down a point or if the market capitulated. I’ll go out on a limb and say that we will see Dow 15000 by the end of the year.
So, a 10% correction may be in the cards, but I think that is just a step down on the road to 15000.