SHLDQ - Sears Holdings Corp

[ERICOPOLY]

How much profit per-share do those assets then generate after the cancer is removed.  Even a mediocre/average bank can earn 13% ROTE, so that puts $1.80 as the per-share floor of what BAC can earn.

 

What's the equivalent computation for SHLD?

[Luke 532]

 

You, the investor.  What has Luke determined to be the cancer and what is the patient post-surgery?

 

You have Seritage headed up by David Lukes (former executive at Kimco and Mall Properties).  An 18M square foot portfolio being carried at rock-bottom leases that can be monetized over time.

 

KCD, a group of brands that all carry value that are NOT directly tied to the success of Sears big-box stores.  They are more tied to the success of SHOS, in my opinion. 

 

Sears Re which could produce float for Lampert to run his investment activities.

 

There are a handful of good businesses within SHLD, but...

 

The cancer is running this as a traditional retailer as Sears has done for decades.  The more Lampert moves toward a real estate/integrated retail company, the more the cancer goes into remission.

 

The cancer is exacerbated by the pension liability, however as interest rates rise that will cut into the liability.

 

I want you to tell me your secrets because I want to make money here possibly.  I'm perfectly free to tell everyone my "secret" thesis behind what the BAC cancer is/was -- it only benefits me for everyone to know because I don't get hurt if the stock reflects the true value.

 

This is going to sound very odd, but I think the most prominent "secret" to why the market prices SHLD the way it is, is largely due to one thing: patience.  Having to meet quarterly or annual benchmarks makes investing in SHLD, with Lampert's history of taking forever in past investment successes, very difficult.  To expand on that point, I've included an excerpt of a talk I recently gave at a local college.  Keep in mind the audience was college students...

 

(start excerpt)

You have a huge advantage over hedge funds and institutional traders: You’ll rarely hear this, but you have a huge competitive advantage over billionaires and institutional funds. 

 

#1 – you are independent and don’t have clients belly-aching about quarterly or annual returns.  In your position you should care more about long-term than about your quarterly or annual returns.  Make decisions today that will impact you 10-20 years from now.  Most people focus on the near-term (anything less than a couple years) and make trades accordingly.  If your clients were all going to leave because you have a “bad” quarter or year then you’d have to make different decisions.  Without clients, you don’t need to worry about that.  You make investments based on the long-term.  This is a huge advantage. 

 

#2 – you don’t have to worry about what others think.  When researching AIG awhile back one of the comments I read from an anonymous hedge fund manager was that he/she saw great value in the AIG shares, but didn’t want to buy them because “I was afraid that if I lost money in AIG again that my clients wouldn’t understand and would leave.”  You don’t have that problem.  When you see $1 trading for $0.50 you can buy it. 

 

Throughout your investment career you will hear about high frequency trading, large institutions, etc. having an advantage and how can the little guy compete.  It’s just not applicable for the value investor, it is more applicable to the day trader.

(end excerpt)

[Luke 532]

How much profit per-share do those assets then generate after the cancer is removed.  Even a mediocre/average bank can earn 13% ROTE, so that puts $1.80 as the per-share floor of what BAC can earn.

 

What's the equivalent computation for SHLD?

 

We all know it's too early to know that until they make more progress.  Just speaking in terms of leasing out space, I think it is a very safe bet that they would be able to lease at multiples higher than the amount they are currently paying per square foot.  How does that translate into EPS?  That remains to be seen.

[Guest wellmont]

Is it just me or do Munger's words make you think of SHLD?

 

This is from Variant Perceptions, user PlanMaestro's blog.  I only included an excerpt.  Click link for full blog post...

 

http://variantperceptions.wordpress.com/2012/03/07/munger-on-the-perfect-turnaround/

I’ve had many friends in the sick business fix-up game over a long lifetime. And they practically all use the following formula—I call it the cancer surgery formula:

 

-They look at this mess.

-And they figure out if there’s anything sound left that can live on its own if they cut away everything else.

-And if they find anything sound, they just cut away everything else.

-Of course, if that doesn’t work, they liquidate the business.

-But it frequently does work.

 

he's very smart....

 

"if that Doesn't Work, they liquidate the business".

[hyten1]

sold bunch of way out of money puts, such high premiums

[ERICOPOLY]

How much profit per-share do those assets then generate after the cancer is removed.  Even a mediocre/average bank can earn 13% ROTE, so that puts $1.80 as the per-share floor of what BAC can earn.

 

What's the equivalent computation for SHLD?

 

We all know it's too early to know that until they make more progress.  Just speaking in terms of leasing out space, I think it is a very safe bet that they would be able to lease at multiples higher than the amount they are currently paying per square foot.  How does that translate into EPS?  That remains to be seen.

 

Assets are worth what they generate.  So we don't know what they generate?

[Luke 532]

 

We all know it's too early to know that until they make more progress.  Just speaking in terms of leasing out space, I think it is a very safe bet that they would be able to lease at multiples higher than the amount they are currently paying per square foot.  How does that translate into EPS?  That remains to be seen.

 

Assets are worth what they generate.  So we don't know what they generate?

 

Generating significant rental income now?  No.  I'm not looking only at where the puck is, but more on where it's going.

[ERICOPOLY]

Why is anyone still invested in ESL?

 

Let's say you guys are right and he is selling everything in ESL except for SHLD.

 

Then why pay Eddie a cut on SHLD's future runup, when you can instead just cash out of ESL and own SHLD directly?

[rogermunibond]

How much profit per-share do those assets then generate after the cancer is removed.  Even a mediocre/average bank can earn 13% ROTE, so that puts $1.80 as the per-share floor of what BAC can earn.

 

What's the equivalent computation for SHLD?

 

We all know it's too early to know that until they make more progress.  Just speaking in terms of leasing out space, I think it is a very safe bet that they would be able to lease at multiples higher than the amount they are currently paying per square foot.  How does that translate into EPS?  That remains to be seen.

 

Assets are worth what they generate.  So we don't know what they generate?

 

Marty Whitman has written about how value is overlooked by focusing too much on what assets generate in income.  Especially assets that are carried at historical cost.  That said, Third Avenue is not a SHLD shareholder IIRC.

[ERICOPOLY]

 

We all know it's too early to know that until they make more progress.  Just speaking in terms of leasing out space, I think it is a very safe bet that they would be able to lease at multiples higher than the amount they are currently paying per square foot.  How does that translate into EPS?  That remains to be seen.

 

Assets are worth what they generate.  So we don't know what they generate?

 

Generating significant rental income now?  No.  I'm not looking only at where the puck is, but more on where it's going.

 

And where is it going?  "Where" is a destination, not a direction.  That's what I'm trying to tease out of you.

 

I'm just getting vague ideas that their leases are too low.  How high is higher?  And what have you done to translate that into a concept of magnitude of profit per share.

 

I hold my BAC because I know what it will generate after expense runoff.  And I have a timeframe in mind -- near term, less than 2 years.

 

But how do you stick with SHLD when you don't know what the profit will be, or when?

 

You can surely double your money in WFC in 7 years or less -- perhaps 5.  And it's safe and comfortable to own.  So in order to chose SHLD over WFC, you've got to have a lot of conviction, right? 

[ERICOPOLY]

How much profit per-share do those assets then generate after the cancer is removed.  Even a mediocre/average bank can earn 13% ROTE, so that puts $1.80 as the per-share floor of what BAC can earn.

 

What's the equivalent computation for SHLD?

 

We all know it's too early to know that until they make more progress.  Just speaking in terms of leasing out space, I think it is a very safe bet that they would be able to lease at multiples higher than the amount they are currently paying per square foot.  How does that translate into EPS?  That remains to be seen.

 

Assets are worth what they generate.  So we don't know what they generate?

 

Marty Whitman has written about how value is overlooked by focusing too much on what assets generate in income.  Especially assets that are carried at historical cost.  That said, Third Avenue is not a SHLD shareholder IIRC.

 

I can hold a vacant lot that isn't generating value income today.  Yes, it still have value even though it has negative cash flow from the property tax.

 

But if you were going to buy it from me and develop it into a new use, wouldn't you want to first estimate how much cash flow you would get from it before embarking on that redevelopment project?

 

And that's all I'm asking -- you are going to redevelop it, that will generate a cash flow, and then you'll be able to put a capitalized value on it.

 

So I'm just asking what that value is.

[Luke 532]

And where is it going?  "Where" is a destination, not a direction.  That's what I'm trying to tease out of you.

 

http://money.cnn.com/2006/02/03/news/companies/investorsguide_lampert/index.htm

Could Sears Holdings evolve into another Berkshire Hathaway? "One of the unspoken secrets about business leaders is that they often have no idea about where they're going to end up," Lampert says coyly. "I know the right direction. Whether we end up at the destination -- rebuilding Sears Holdings into a great company on many dimensions -- I don't know. But we're headed in that direction."

 

I'm just getting vague ideas that their leases are too low.  How high is higher?  And what have you done to translate that into a concept of magnitude of profit per share.

 

That's because I'm being vague  :)  I don't know exacts as each market and each lease is different.

 

I hold my BAC because I know what it will generate after expense runoff.  And I have a timeframe in mind -- near term, less than 2 years.

 

We can get an idea on timeframe from a few things.  First, this post from another user has some great points,,,

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/shld-sears/200/

Why do I think he’s closer to doing X than in 2008?  I would check out Schriesheim’s background, hired on Aug 2011.  He has a handful of 3-5 year stints where the outcome was remarkable.  Looking back to 2012, I’m not surprised SHLD spun-off OSH,  SHOS and SCC.to.  Robert was brought in for this transformation and if you look at his previous body of work it’s hard not to think X started happening in 2012 and should continue in 2013.  For all the crap he receives for not hiring the “right” people, I think he did well on this and he hired another guy David Lukes in early 2012 (previously CEO of Mall Properties and experience at Kimco).  I’m not going to bore you with the real estate assets, cheap leases, the brands etc., I just know these two hires were strategic and represent an event where EL is finally ready to start X.

 

Lampert also assumed CEO role earlier this year and has been monetizing stuff more rapidly than in previous years.  And last year he finally said...

"We can't deny that we're, one, a real estate company, and two, a customer company," Lampert said.  "We still have the paradigm of trying to improve our operations but realizing we have a (real estate) asset base that deserves a return."

http://www.memphisdailynews.com/news/2012/may/3/sears-execs-say-retailer-financially-strong//print

 

But how do you stick with SHLD when you don't know what the profit will be, or when?

 

Because of the margin of safety found in the real estate, brands, inventory.  And there is, admittedly, an element of faith that Lampert will use these assets to generate a return over time (yes, I know it's been a decade already). 

 

You can surely double your money in WFC in 7 years or less -- perhaps 5.  And it's safe and comfortable to own.  So in order to chose SHLD over WFC, you've got to have a lot of conviction, right?

 

I own BAC and AIG for the reasons you've mentioned above.  I own SHLD for it's very limited downside and extreme upside.

[peridotcapital]

How much profit per-share do those assets then generate after the cancer is removed.  Even a mediocre/average bank can earn 13% ROTE, so that puts $1.80 as the per-share floor of what BAC can earn.

 

What's the equivalent computation for SHLD?

 

We all know it's too early to know that until they make more progress.  Just speaking in terms of leasing out space, I think it is a very safe bet that they would be able to lease at multiples higher than the amount they are currently paying per square foot.  How does that translate into EPS?  That remains to be seen.

 

Assets are worth what they generate.  So we don't know what they generate?

 

Marty Whitman has written about how value is overlooked by focusing too much on what assets generate in income.  Especially assets that are carried at historical cost.  That said, Third Avenue is not a SHLD shareholder IIRC.

 

I can hold a vacant lot that isn't generating value income today.  Yes, it still have value even though it has negative cash flow from the property tax.

 

But if you were going to buy it from me and develop it into a new use, wouldn't you want to first estimate how much cash flow you would get from it before embarking on that redevelopment project?

 

And that's all I'm asking -- you are going to redevelop it, that will generate a cash flow, and then you'll be able to put a capitalized value on it.

 

So I'm just asking what that value is.

 

This highlights the biggest reason I do not feel compelled to take a long position right now. I have an idea of how much these assets could generate, but the range is quite large. Add on top of that the fact that I know it will take years to even get > 50% of the space leased, but I don't know if it will be 5 or 10 (I just know it won't be 1-3). If you take all of that into consideration, plus the retail losses, and factor in today's enterprise value of $9B-10B, it is hard for me to conclude "wow, I am getting tremendous value here." If the price was different it would change things.

 

Now, if you are fairly certain the value is above the current stock price, and you admit that you don't really know/care by exactly how much or how long it will take (which is a fair position that many here seem to be taking), then you buy it now and wait patiently. I just personally need more numbers to confirm I should be in that camp, even if my projections give me ranges that are fairly wide due to all of the uncertainty amid a very long time horizon.

[Luke 532]

I can hold a vacant lot that isn't generating value income today.  Yes, it still have value even though it has negative cash flow from the property tax.

 

But if you were going to buy it from me and develop it into a new use, wouldn't you want to first estimate how much cash flow you would get from it before embarking on that redevelopment project?

 

And that's all I'm asking -- you are going to redevelop it, that will generate a cash flow, and then you'll be able to put a capitalized value on it.

 

So I'm just asking what that value is.

 

Aren't there options that SHLD is pursuing that won't necessarily care about the cash flow of certain properties (data centers, disaster recovery centers, etc.)?

[ERICOPOLY]

See, if assets have value of $400 per share, but are going to be sitting completely idled for 7 years...

 

Then present value is $200 (at 10% discount rate).

 

So it makes no sense to me to just say "well, I know the assets have value but I just don't know when they'll be put to good use".

 

That's doesn't necessarily create any margin of safety because you haven't demonstrated any kind of a present value discount while you wait an unknown quantity of years for the cancer to be cut out.

 

You could have a holding company with $1,000 locked up in cash yielding nothing.  But if you believed this cash would neither be invested nor distributed for 50 years, then the value of shares in this holding company would be what?    You can't say anything below $1,000 provides a margin of safety.  You have to first know when it will be put to good use, or liquidated.  Only then can you get a value and thus determine what your margin of safety might really be for a given market price on the shares.

[ERICOPOLY]

I can hold a vacant lot that isn't generating value income today.  Yes, it still have value even though it has negative cash flow from the property tax.

 

But if you were going to buy it from me and develop it into a new use, wouldn't you want to first estimate how much cash flow you would get from it before embarking on that redevelopment project?

 

And that's all I'm asking -- you are going to redevelop it, that will generate a cash flow, and then you'll be able to put a capitalized value on it.

 

So I'm just asking what that value is.

 

Aren't there options that SHLD is pursuing that won't necessarily care about the cash flow of certain properties (data centers, disaster recovery centers, etc.)?

 

A property put to use as a data center will create a cash flow (one would certainly hope so).

[Luke 532]

See, if assets have value of $400 per share, but are going to be sitting completely idled for 7 years...

 

Then present value is $200 (at 10% discount rate).

 

So it makes no sense to me to just say "well, I know the assets have value but I just don't know when they'll be put to good use".

 

That's doesn't necessarily create any margin of safety because you haven't demonstrated any kind of a present value discount while you wait an unknown quantity of years for the cancer to be cut out.

 

You could have a holding company with $1,000 locked up in cash yielding nothing.  But if you believed this cash would neither be invested nor distributed for 50 years, then the value of shares in this holding company would be what?    You can't say anything below $1,000 provides a margin of safety.  You have to first know when it will be put to good use, or liquidated.  Only then can you get a value and thus determine what your margin of safety might really be for a given market price on the shares.

 

I agree.  I'm also not 100% sold that Lampert won't make some very major moves in the near future that tips his hand (hint: let's see if he restocks inventory after the holiday season, if not he might close a bunch of stores, and when they did that a few years ago and put out a list of the closing stores the stock took off).  He doesn't necessarily actually have to do all of the monetization for the market to react (and the price never comes back down), but if he announces something along the lines of closing ESL/full-time SHLD, we plan on spinning off a REIT, we plan on being a conglomerate of real estate/integrated retail/reinsurance/etc.  I'm not one to try and predict what the market will do, but I would imagine the stock would rise sharply if/when one of the above occurs.

[rohitc99]

See, if assets have value of $400 per share, but are going to be sitting completely idled for 7 years...

 

Then present value is $200 (at 10% discount rate).

 

So it makes no sense to me to just say "well, I know the assets have value but I just don't know when they'll be put to good use".

 

That's doesn't necessarily create any margin of safety because you haven't demonstrated any kind of a present value discount while you wait an unknown quantity of years for the cancer to be cut out.

 

You could have a holding company with $1,000 locked up in cash yielding nothing.  But if you believed this cash would neither be invested nor distributed for 50 years, then the value of shares in this holding company would be what?    You can't say anything below $1,000 provides a margin of safety.  You have to first know when it will be put to good use, or liquidated.  Only then can you get a value and thus determine what your margin of safety might really be for a given market price on the shares.

 

eric - you make a great point. there are live examples in markets such as india, where you can find cash bargains (stock selling below cash on books) and the value never gets realized because the management which also owns 75% of the company never pays out the cash as dividend.

[Luke 532]

 

A property put to use as a data center will create a cash flow (one would certainly hope so).

 

Yes, of course.  I didn't choose my words carefully.  I was just trying to make the point that it's not all traditional retailers that will be looking at the space.  And perhaps those looking at the space can use comps from other properties down the street.

[bmichaud]

Eric,

 

On page 20 of the attached Baker Street report, they outline the math on leasing 250K SF in the Woodfield Mall. For reference, CalPERS bought a stake in the mall at $900/SF. Baker uses a triple-net lease rate of $40/SF and a 6% cap rate, to arrive at a $166MM valuation. That works out to be $667/SF versus the $900 CalPERS paid.

 

If you go to page 6 of the report, Baker estimates $7.3B of real estate value in the top 300 owned and 50 leased locations. This works out to $106/SF on 68MM total square feet.

 

Going back to the example Baker utilizes above. Say Seritage ultimately leases out the 68MM SF for an average of $20/SF - with a 7% cap rate, that works out to $19.4B, or $286/SF. For supposedly high quality real estate, that seems low on a per SF basis. Maybe Seritage can charge $30/SF on average - that's $29B at $429/SF. Seems more reasonable.

 

Two key questions: 1) how much will it cost per SF to redevelop and 2) how long before 100% occupancy?

 

From what I can tell based on extremely rough research, it costs just under $300/SF to BUILD commercial real estate in high demand areas. So maybe $100/SF to redevelop? That works out to $6.8B in required mortgage debt for Seritage. So assuming instantaneous redevelopment and 100% occupancy, REIT Seritage would look as follows today:

 

Square Feet: 68 million

NNN/SF: $30

Cap Rate: 7%

Enterprise Value: $29.1B

Mortgage Debt: $6.8B

Equity Value: $22.3B

Equity Value Per SHLD Share: $209

 

Discount by 50% to account for redevelopment and occupancy uncertainty, and perhaps it's worth ~$100 today.

 

 

Edit: I should have been more clear - the intent of this post was to propose a potential "where". If you assume the other assets take care of the remaining liabilities and the cost of winding down unprofitable stores, then even at half of the potential $209 value, the current price is a 50-cent dollar. As far as when to sell etc....buy now, sell half when it reaches $100, then play with the house's money until the full Seritage REIT potential is realized  8)

BakerStreet_SHLD.pdf

[ERICOPOLY]

I'm not one to try and predict what the market will do, but I would imagine the stock would rise sharply if/when one of the above occurs.

 

 

This is what I was asking when I asked where the puck is going.

 

You suggested the puck is going to a Berkshire Hathaway style destination.  That's not the type of "where" I'm referring to.

 

I'm a numbers man.  I want a "where" in terms of a price. 

 

If you don't know what the price is of where the puck should settle, then how are you going to capture the right amount of value (sell at the appropriate price) so that you are compensated for the amount of waiting you endured?  You say the price ought to rise sharply.  But 50% rise in a week is a sharp rise -- that does you no good if you sell it before it goes up 100% over the following month (and stays there, because that "where" the value really is).

 

So it makes sense to put a number on "where" -- otherwise you'll never know when to sell.  And of course you don't even know what your reward is versus the current stock price if you don't know "where" the puck is going.

[Luke 532]

 

This is what I was asking when I asked where the puck is going.

 

You suggested the puck is going to a Berkshire Hathaway style destination.  That's not the type of "where" I'm referring to.

 

I'm a numbers man.  I want a "where" in terms of a price. 

 

So am I... formerly a senior accountant.  Math is probably the reason I love baseball so much.  Anyway, the stock price?  I have no clue what it will be in 2013 or 2014.  I was referring to the business as the puck, not the share price.

 

If you don't know what the price is of where the puck should settle, then how are you going to capture the right amount of value (sell at the appropriate price) so that you are compensated for the amount of waiting you endured? 

 

Perhaps buying puts to protect.

 

You say the price ought to rise sharply.  But 50% rise in a week is a sharp rise -- that does you no good if you sell it before it goes up 100% over the following month (and stays there, because that "where" the value really is).

 

It did rise substantially the past couple months, followed by the large drop.  I didn't sell at $65 because I believe it's likely worth more than that based on asset valuation alone, not counting in what Lampert might do with cash the business throws off to him down the road that he compounds indefinitely.

 

So it makes sense to put a number on "where" -- otherwise you'll never know when to sell.  And of course you don't even know what your reward is versus the current stock price if you don't know "where" the puck is going.

 

There's a difference between not knowing an exact price to sell now vs. realizing it's a great bargain and as the story unfolds, and we can crunch more tangible numbers, and then calculating that value down the road. 

[ERICOPOLY]

 

This is what I was asking when I asked where the puck is going.

 

You suggested the puck is going to a Berkshire Hathaway style destination.  That's not the type of "where" I'm referring to.

 

I'm a numbers man.  I want a "where" in terms of a price. 

 

So am I... formerly a senior accountant.  Math is probably the reason I love baseball so much.  Anyway, the stock price?  I have no clue what it will be in 2013 or 2014.  I was referring to the business as the puck, not the share price.

 

You referred to the NAME of the (Berkshire Hathaway) business as the "where" for the puck.

 

I'm referring to the PRICE that's it's worth.  No, not what the market says it's worth, but what YOU say it's worth.

 

If you don't know, then how do you sell it for a fair price?

 

I'm referring to the price where you sell it.

 

For me, it's 12x earnings for BAC -- that's 12x the post-cancer-removal earnings. 

 

So I will calculate that for you based on 13% ROTE on today's tangible book value to put my money where my mouth is:

 

2014 earnings $1.40

2015 earnings $1.60

2016 earnings $1.80  (this is the post-cancer-removal 13% ROTE)

 

So 12x multiple on 1.80 = 21.60

less 40 cents for 2014

less 20 cents for 2015

 

Roughly $21 is what I think it is worth today at what I think is about fair multiple of 12x.

 

 

So... what's your price on SHLD?

[Luke 532]

 

So... what's your price on SHLD?

 

Eric, I know what you're getting at, but I don't have a specific price in mind.  If the stock rises astronomically on no news, say up to $100 or so (just an arbitrary number), then I'd likely buy puts.  Until progress is made and we can use more tangible numbers on the money it's producing, we can't place a specific value.

 

If Lampert were to simply break it all up and sell all the pieces I would find it hard to imagine he couldn't fetch at least $40/share... based on tax records of property values (I know that's not the most accurate), inventory, brands, minus liabilities.

 

If he has a REIT, Sears Re, Seritage, etc. under the SHLD umbrella, throwing off cash that Lampert then reinvests like a mini-Berkshire, then it could be many multiples higher than current.

 

I currently don't let anybody manage my money, but if I have the opportunity to partner with Lampert via SHLD, well, he's probably one of a select few that I would let invest a portion of my net worth.

[krazeenyc]

Eric,

 

I think you know what the story is for SHLD is not a simple one where there is 1/2 businesses that could be cut off to revitalize everything.  SHLD is a FRANKENSTEIN's Monster created by Eddie Lampert. And it is like you said a few months ago similar to an oil company that has oil in the ground but has to spend $$ to go get it. I originally likened Sears to a Rent Controlled apartment where once you got the tenant out, the money could be made. But I've changed my thesis since then.

 

While I agree with Peridot for the most part, I disagree with him on the upside for SHLD - I think it's much higher ( I think his upside does not assume a nicely profitable retail side of things).  I think he is right on regarding the downside for SHLD due to asset protection. I also agree with both him and Eric that it's going to take time to get stores subleased/leased.

 

Looking at the numbers over and over, I'm starting to realize that Sears (the retail side) will be meaningfully profitable given the right average store size.  Add to that the cashflows from the rental income from the subleased section of the store, as well as the reduced cash drain from the pension fund as rates rise SHLD should  be able to earn a reasonable ROI on its entire asset base.  If SHLD can earn a 10% ROA (I know it seems outlandish now) you will make multiples on your money.  This I think is the real bull case. Now to be fair, SHLD is a small position for me right now as I only 1000 shares of SHLD, whereas earlier in the summer I owned appx 10x that amount -- I'm not sure what is holding me back. (Maybe I'm not convinced, maybe I'm greedy and want it to go lower, I'm not sure. Perhaps I'm not convinced of the certainty of the bull case). 

 

As an aside. I am a loyal Amazon Prime customer. We spend at least $5k a year on amazon on random stuff (we have 2 young kids) - Diapers, toys, games, books, etc. We buy everything there. The price is right and the service is great.

 

Over the past few months, I've been trying out SYW Max (to study SHLD).  It's actually quite good -- the websites themselves are not great -- but their fulfillment seems to be pretty good. Shipping is free and they've been able to get everything to me within 2 days as promised using only UPS Ground delivery (this is a good sign). I expect that they've been spending all their CAPEX here. They seem to give you free SYW points all the time and additionally promise additional bonus points with purchases via special email offers.  The SYW points that you earn expire quickly though -- anyone know how the accounting for this works? thanks

 

By the way I don't think ESL is going to make SHLD into his permanent Investment Vehicle -- who knows 5-10 years down the line, but that is not at all part of my thesis.