Aug

22

Sears Stock, from Sam Marx

August 22, 2012 |

 Any opinions on Sears Stock SHLD?

Barrons had a positive article on it last week but the shorts keep shorting it.

Down 2 Yesterday.

Somehow I find it difficult not to be in Ed Lampert's corner.

Anatoly Veltman writes: 

Maybe this is off-topic re: stock purchase, but I'll throw in an Alan-esque: in advance of seasonal clothing change-overs this year, they marked down 85-90%, even off fashionable labels.

Jeff Watson opines: 

A common mistake retailers do is to mark things down, give up gross profit, all in the order of increasing the sales numbers. Giving up gross is a bad, bad thing. In retail, if something is not sold at full price, it is considered to be shrink. Shrink is very bad in the retail game. I went to Sears this week and bought 3 pairs of Levis, for $16 each and 3 pairs of nice Dockers for $19 each. I saw Sears selling name brand surf trunks that I know cost them $16 wholesale, selling for $4.99. Sears is giving clothes away. I wish their sales would extend to the Craftsman line, their electronics, or their appliance line, which was only 25% off the big ticket items.

An anonymous contributor adds:

A common mistake is to think that Eddie is about retail, Eddie is about cashflow liquidation and control stock. Is Berkshire about Textiles? He has now also filed on the Gap and Avon. Sears was always about the owned commercial real estate and durable goods, but the internet and housing bust crimped it. He also has filed on Autozone and Autonation (Sears automotive?).

his MO has been to buy 50% of the float of a stock that he could LBO completely, but then to drive cashflow into stock repurchases while cutting CapEx. My personal opinion is he is planning to eventually put all these pieces together.

The technical issue then becomes the expiration of his 5 year lock-up for investors that Goldman raised the money for, therefore I would not be surprised by a large 4th quarter in the stock.

His stocks trade more like a corner or pool operated stock. The reality is they are no longer public stocks they just happen to trade on an exchange–stocks like this used to be called footballs and to understand the trading one must understand the personality.
 


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