SHLDQ - Sears Holdings Corp

[Guest wellmont]

There are a number of cognitive biases on both sides that drive this discussion one way or the other.

 

The largest one is probably that it's a puzzle, and many investors are drawn to puzzles. How many times have people on other threads and/or personally looked at an investment and reached an "ah-ha" moment where you just "understood" what was going on for the company?

 

Investors on both sides "understand" what is going on in this puzzle. The fact that it's a difficult puzzle adds to the allure of being one of the ones that "gets it." (Either figuring out ESL/Berkowitz's secret or having one over on both ESL and Berkowitz -- take your pick.)

 

The ego and various other biases do the rest of the work.

 

interesting. we should look for anti-puzzles....

[Mephistopheles]

I'm curious, how many are:

Bull	Bear
Made Money	Made Money
Lost Money	Lost Money

 

My guess is that sentiment is extremely influenced by actual results, not the probabilities set out before and during the investment.

 

I made a lot of money, probably a 50-75% IRR, last year to early this year - I consider myself lucky. I am neutral now, neither bullish or bearish.

 

Edit: A lot depends on what Lampert does. I think liquidation value is substantially more than the current market cap, but that value is (possibly/probably) decreasing with every dollar he spends on SYW, and that's why I'm neutral.

[ERICOPOLY]

I made a lot of money, probably a 50-75% IRR, last year to early this year - I consider myself lucky. I am neutral now, neither bullish or bearish.

 

You can add another 5% compounded by mid-January with the $25 strike put premium, and if you get called you can write a call for more premium.  Like falling back to a defensive position and keeping on fighting -- cue the end scene of Saving Private Ryan.  Find a defilade position!  Jackson!

 

The annualized rate on the out-of-the-money puts is far in excess of the burn rate of SYW strategy.  Defensive position... fall back... fight... defensive position... fall back.

 

It's tough to be short too.  The borrow costs... the premium costs... it's a war of attrition between longs and shorts.

[adesigar]

I'm curious, how many are:

Bull	Bear
Made Money	Made Money
Lost Money	Lost Money

 

My guess is that sentiment is extremely influenced by actual results, not the probabilities set out before and during the investment.

 

Bull - Lost Money

 

I haven't lost in real terms. Cost of SHLD adjusted for the spinoffs is under 30(SHOS, SEARF, LE). But compared to the gains I could've had in S&P and Berkshire Hathaway over the same time period I have lost money.

[TeddyLampert]

I'm curious, how many are:

Bull	Bear
Made Money	Made Money
Lost Money	Lost Money

 

My guess is that sentiment is extremely influenced by actual results, not the probabilities set out before and during the investment.

 

Neither a bull nor a bear, but an observer.

 

Formerly a long, following stirrings last winter of a possible change in strategy under the Real Teddy Lampert. My thesis was that this was the start of an expedient unlocking of net asset value. Upon further diligence, the facts changed, and so did my mind. So I exited. I was fortunate to have bought at the February lows, so the IRR was good. But before this should sound boastful, I credit any money I made to luck. I decided not to become an active trader of the stock in spite of the initial positive conditioning. As Pabrai has said regarding SHLD: been there, done that, got the t-shirt. Should the facts materially change, I may revisit. I have no strong feelings about SHLD.

 

As an aside, I was at the dentist office and was reading a copy of Fortune Magazine (8/11/14). There is a wonderful article on TJ Max on page 57 (the title is "Is TJ Max the Best Retailer in America?"). I recommend anyone interested in big-box retail to read it. Incidentally, TJX is owned by Ruane Cunniff, so the company must be doing something right. The article talks about how hard retail is (obviously) and explores why TJX has been unusually successful. Readers will be reminded just how important a retailer's RVP or retail value proposition is. It also demonstrates how a retailer can be innovative within a traditional retail format. The article makes no mention of SHLD, but the points it raises about what makes a retailer successful will stand in sharp contrast to the current situation at Sears.

 

 

   

[peridotcapital]

I'm curious, how many are:

Bull	Bear
Made Money	Made Money
Lost Money	Lost Money

 

My guess is that sentiment is extremely influenced by actual results, not the probabilities set out before and during the investment.

 

I was long and bullish for quite a while between 2004 and 2008 and made out very well on the common shares. However, once it was clear that the thesis I was banking on (diversifying away from the Sears/Kmart retail operations) was not likely in the cards I moved the money from the equity to the debt. During that time I have been an equity bear but have never been short and have actually been long the bonds and making good money. So I guess I'm a hybrid case. I am not opposed to going long the equity again, but at least one of two things would have to change; the price and/or the strategy.

[Luke 532]

Appliance sale: GE inks 3.3B deal with Electrolux

http://www.cbsnews.com/news/appliance-sale-ge-inks-3-3b-deal-with-electrolux/

[davidoosnk]

Appliance sale: GE inks 3.3B deal with Electrolux

http://www.cbsnews.com/news/appliance-sale-ge-inks-3-3b-deal-with-electrolux/

 

It looks like the brand was bought for $3.3 billion. That is a lot of money. Any thoughts on how this GE deal might compare to any future Kenmore deal? Surprised that there is no reaction in the stock. At least for the time being.

 

[davidoosnk]

Appliance sale: GE inks 3.3B deal with Electrolux

http://www.cbsnews.com/news/appliance-sale-ge-inks-3-3b-deal-with-electrolux/

 

It looks like the brand was bought for $3.3 billion. That is a lot of money. Any thoughts on how this GE deal might compare to any future Kenmore deal? Surprised that there is no reaction in the stock. At least for the time being.

 

This article has some detail. http://www.fool.com/investing/general/2014/09/07/if-electrolux-buys-ges-appliance-business-will-whi.aspx#commentsBoxAnchor. It looks like deal ended up ultimately priced more than 30% higher than whisper amount. Perhaps a good sign?

[Picasso]

Appliance sale: GE inks 3.3B deal with Electrolux

http://www.cbsnews.com/news/appliance-sale-ge-inks-3-3b-deal-with-electrolux/

 

It looks like the brand was bought for $3.3 billion. That is a lot of money. Any thoughts on how this GE deal might compare to any future Kenmore deal? Surprised that there is no reaction in the stock. At least for the time being.

 

This article has some detail. http://www.fool.com/investing/general/2014/09/07/if-electrolux-buys-ges-appliance-business-will-whi.aspx#commentsBoxAnchor. It looks like deal ended up ultimately priced more than 30% higher than whisper amount. Perhaps a good sign?

 

Does anyone know how much profit KCD produces?  Looks like about $6.5 billion of sales versus the GE deal at $8.3 billion of sales and $381 million of profit. 

[jeffmori7]

Let's not forget that Kenmore is just a name, appliances are built by the GE, Whirlpool, of this world (I don't know which ones exactly).

[Vish_ram]

I'm curious, how many are:

Bull	Bear
Made Money	Made Money
Lost Money	Lost Money

 

My guess is that sentiment is extremely influenced by actual results, not the probabilities set out before and during the investment.

 

I was long and bullish for quite a while between 2004 and 2008 and made out very well on the common shares. However, once it was clear that the thesis I was banking on (diversifying away from the Sears/Kmart retail operations) was not likely in the cards I moved the money from the equity to the debt. During that time I have been an equity bear but have never been short and have actually been long the bonds and making good money. So I guess I'm a hybrid case. I am not opposed to going long the equity again, but at least one of two things would have to change; the price and/or the strategy.

 

If SHLD burns a few billions more, Aren't you worried that they will have trouble refinancing? In many declining companies with debt, it sends stock reeling when debt is due for refinancing.

[merkhet]

I suspect that if they go the secured debt route (using their real estate), they shouldn't have much problem.

[peridotcapital]

Let's not forget that Kenmore is just a name, appliances are built by the GE, Whirlpool, of this world (I don't know which ones exactly).

 

Exactly, this GE deal is not a comp for Kenmore. GE is licensing the brand name back to Electrolux per the press release issued this morning. 

[peridotcapital]

I'm curious, how many are:

Bull	Bear
Made Money	Made Money
Lost Money	Lost Money

 

My guess is that sentiment is extremely influenced by actual results, not the probabilities set out before and during the investment.

 

I was long and bullish for quite a while between 2004 and 2008 and made out very well on the common shares. However, once it was clear that the thesis I was banking on (diversifying away from the Sears/Kmart retail operations) was not likely in the cards I moved the money from the equity to the debt. During that time I have been an equity bear but have never been short and have actually been long the bonds and making good money. So I guess I'm a hybrid case. I am not opposed to going long the equity again, but at least one of two things would have to change; the price and/or the strategy.

 

If SHLD burns a few billions more, Aren't you worried that they will have trouble refinancing? In many declining companies with debt, it sends stock reeling when debt is due for refinancing.

 

Not at all. They have already hinted they are going to use their real estate to refinance, much like JCP did.

[txlaw]

Let's not forget that Kenmore is just a name, appliances are built by the GE, Whirlpool, of this world (I don't know which ones exactly).

 

Yeah, this could actually be a negative for SHLD and SHOS in terms of their competitive positioning for Kenmore. 

 

I think both GE and Electrolux have manufactured Kenmore appliances.  That means you have a manufacturing supplier with increased market power and with its own brand names that it could potentially push over Kenmore.  In fact, I think Electrolux is trying to increase is presence in NA, so I wouldn't be surprised if they really try to take market share away from Kenmore -- especially if SHLD/SHOS loses market share in the appliance market, generally.

 

So this transaction potentially decreases the value of the K in KCD. 

[davidoosnk]

Let's not forget that Kenmore is just a name, appliances are built by the GE, Whirlpool, of this world (I don't know which ones exactly).

 

Yeah, this could actually be a negative for SHLD and SHOS in terms of their competitive positioning for Kenmore. 

 

I think both GE and Electrolux have manufactured Kenmore appliances.  That means you have a manufacturing supplier with increased market power and with its own brand names that it could potentially push over Kenmore.  In fact, I think Electrolux is trying to increase is presence in NA, so I wouldn't be surprised if they really try to take market share away from Kenmore -- especially if SHLD/SHOS loses market share in the appliance market, generally.

 

So this transaction potentially decreases the value of the K in KCD.

 

 

One the one hand, perhaps, if one is prepared to make some predictions about manufacturing advantages and so on. However, IMO the potential decrease in perceived value is more than offset by the tangible, real value that the brand was sold for and albeit hard to compare, it provides a figure indicating there is some value in K, and probably C and D as well, and showing that selling these assets for cold hard cash (which would make its way back to the parent SHLD) is not as far fetched as some people might have thought.

 

[txlaw]

Let's not forget that Kenmore is just a name, appliances are built by the GE, Whirlpool, of this world (I don't know which ones exactly).

 

Yeah, this could actually be a negative for SHLD and SHOS in terms of their competitive positioning for Kenmore. 

 

I think both GE and Electrolux have manufactured Kenmore appliances.  That means you have a manufacturing supplier with increased market power and with its own brand names that it could potentially push over Kenmore.  In fact, I think Electrolux is trying to increase is presence in NA, so I wouldn't be surprised if they really try to take market share away from Kenmore -- especially if SHLD/SHOS loses market share in the appliance market, generally.

 

So this transaction potentially decreases the value of the K in KCD.

 

 

One the one hand, perhaps, if one is prepared to make some predictions about manufacturing advantages and so on. However, IMO the potential decrease in perceived value is more than offset by the tangible, real value that the brand was sold for and albeit hard to compare, it provides a figure indicating there is some value in K, and probably C and D as well, and showing that selling these assets for cold hard cash (which would make its way back to the parent SHLD) is not as far fetched as some people might have thought.

 

I wasn't talking about perceived value.  I was talking about real value based on competitive position of the Kenmore brand. 

 

If the Kenmore brand loses market and mind share due to ineptitude at Sears-affiliated ops, that is real brand value lost.  Similarly, if the strengthened position of a competitor results in market share lost, that is real loss of brand value.  Note that SHLD is dependent on large third party manufacturers for Kenmore and any consolidation in that part of the market decreases SHLD's negotiating power as an appliance retailer with lots of market share. 

 

Also keep in mind that if SHLD sells off the Kenmore brand, the buyer will almost certainly want to start distributing that brand beyond Sears.  Not only does that pose problems both for SHLD and SHOS -- and particularly, SHOS -- but that means SHLD is giving up any upside in increased distribution of Kenmore through more attractive channels (e.g., Costco).  I would have loved to have seen SHLD sell off Kenmore to LG or someone else a while back, but I'm not so sure they can do it now because of the boat they have put themselves in.

 

But who knows.

[Luke 532]

Lampert sells more AutoNation, this time 145,000+ shares ($7.8M) since Sept 4th.

http://www.sec.gov/Archives/edgar/data/350698/000118143114031564/xslF345X03/rrd415875.xml

[Luke 532]

Pending tenant deals with Moe's Southwest Grill (love that place), MOD Pizza, Ted's Montana Grill, etc.  Scroll down to the very bottom of this Auto Center leasing flyer: http://search.midamericagrp.com/property_files/flyer_52407.pdf

 

I didn't realize the franchisor/operator of Moe's also oversees Carvel, Cinnabon, Schlotzsky's, Auntie Anne's, McAlister's (never heard of this one), and some Seattle's Best.

 

Moe’s Southwest Grill joined FOCUS Brands Inc. Atlanta-based FOCUS Brands Inc. is the franchisor and operator of over 4,300 Carvel® Ice Cream, Cinnabon® Bakery, Schlotzsky’s® Deli, Moe’s Southwest Grill®, Auntie Anne’s® Pretzels and McAlister’s® Deli locations, as well as the franchisor of Seattle’s Best Coffee® on certain military bases and in certain international markets.

http://www.moes.com/about-moes/

 

Also noteworthy that Ted’s Montana Grill was started by Ted Turner.

[fareastwarriors]

Fitch Cuts Sears Ratings on Cash Burn Concerns

 

Credit Ratings Of Sears Holdings Cut To Double-C From Triple-C

 

 

http://online.wsj.com/articles/fitch-cuts-sears-ratings-on-cash-burn-concerns-1410366664

[davidoosnk]

Land's End stock, incredibly, hit $44 today.

 

Now, aside from the fact that there are elements of a short squeeze (which could also happen to SHLD under the right conditions), please consider the following....

 

What is the likelihood that Lampert could pull from the same resources that made Land's End online business a success, and concomitantly spinoff Sears Online the way he did LE? I would think that combination would have one heck of a valuation and positive returns for shareholders... It may seem far fetched, but until I saw it happen before my very own eyes, Land's End spinoff and then attaining $44 was pretty far fetched.

 

Thoughts?

 

 

[oddballstocks]

Land's End stock, incredibly, hit $44 today.

 

Now, aside from the fact that there are elements of a short squeeze (which could also happen to SHLD under the right conditions), please consider the following....

 

What is the likelihood that Lampert could pull from the same resources that made Land's End online business a success, and concomitantly spinoff Sears Online the way he did LE? I would think that combination would have one heck of a valuation and positive returns for shareholders... It may seem far fetched, but until I saw it happen before my very own eyes, Land's End spinoff and then attaining $44 was pretty far fetched.

 

Thoughts?

 

How is the company itself doing?  I asked my wife about Lands End and she said "It's too bad Sears destroyed them, they used to have good stuff."  So the stock is up, but how do you get that mindshare back?

 

Remember The Lands End Coat of the mid-90s?  They owned that coat model, everyone had it.  How do they regain those lost customers?

[ni-co]

Land's End stock, incredibly, hit $44 today.

 

Now, aside from the fact that there are elements of a short squeeze (which could also happen to SHLD under the right conditions), please consider the following....

 

What is the likelihood that Lampert could pull from the same resources that made Land's End online business a success, and concomitantly spinoff Sears Online the way he did LE? I would think that combination would have one heck of a valuation and positive returns for shareholders... It may seem far fetched, but until I saw it happen before my very own eyes, Land's End spinoff and then attaining $44 was pretty far fetched.

 

Thoughts?

 

Zero. LE is a fundamentally different business. It's a brand and not simply an online retailer. You can't buy LE anywhere but there. This makes such a huge difference in their business model that I'm surprised that people alway lump them together with simple retailers that are under immense pressure re. margins.

[Luke 532]

Sears Achieves “Genius Status” for its Work in the Digital Space

http://blog.searsholdings.com/inside-shc/sears-achieves-genius-status-for-its-work-in-the-digital-space/