SHLDQ - Sears Holdings Corp

[heth247]

 

I agree with Kraven, 100%. I have left a similar comment on his article.

 

Dollars to donuts his book continues with the myth that the value of the non-guarantor subsidiaries is reserved exclusively for shareholders. I've tried to set him straight on this before, and he did not listen then. I suspect the reason he says it's "too complex" for the article is because he does not really understand the situation, but perhaps I am being too harsh.

 

It's a shame that he's put so much time in to this for such a mediocre result.

 

Good to see you are still here, Scott.

 

But to me Bishop does offer a new view of Sears to decode what Eddie is trying to do. It is not just about how fast SHLD can selling-off/rent out RE as we have been looking at here. It is about "a consolidated holding company that can leverage its guarantor subsidiaries for the benefit of its non-guarantor subsidiaries with a permanently embedded capital structure that enables it to monetize its unencumbered assets to reward long-term partners with their patience by creating financial fortunes".

 

It reminds me of what I have read recently from Martin Whitman's "Modern Security Analysis" book, in which he pointed out that a common mistake made by Wall street (even by Ben Grasham/Dodd approach) is to focus too much on the "going concern" of a company in short-term (cash flows, earnings),  but less on the long-term wealth creation (resource conversion, attractive access to capital markets).

 

[hardincap]

 

You don't risk ownership in the company if you purchase common instead of your writing these puts.

 

Yes, of course.  I hold X shares as a business owner that I won't touch.  I also write puts for premium that can be used to acquire more shares upon expiration.  The strategy adds to my ownership, doesn't take away from it.  I don't do one or the other, I do both.

 

Writing a put and not purchasing an offsetting call is owning the downside without owning the upside.

 

The guy who is buying your puts (to hedge his added common) has been kicking your ass at this game.

 

In previous posts I've mentioned if the stock is in the $60's I can buy a put to protect gains. 

 

It's important to understand the reason I'm doing this... it's to accumulate shares, not to necessarily profit a ton short-term.  All I have to do writing puts is wait until they expire.  That's it.  What's the point of writing a put at the $45 strike for $5, buying a call at the same strike for $4... and the stock is at $45 at expiration?  I would make $1 instead of $5 on just selling the put.  Eric, I understand your point, but the goal of my strategy is to accumulate shares, not make a killing on price movement.  It gets to the time value of options... I don't want to pay premium for it (unless the stock is in the $60's/$70's, etc. to lock in gains), I'd rather sell the time premium.  We just have a different philosophy on it.

 

I've been writing puts since 2007.  Most of the time, I made a little bit of profit here and there only to get my ass kicked by losing a ton of upside eventually.

 

I once shared your philosophy on it.  Experience has changed my views.

 

And I credit UCCMAL for being a faster learner than I.

 

This is only if you believe SHLD has great upside to begin with. If you are in the middle, that is you dont believe it has much more downside but you also dont think it has major upside, it makes sense to write puts to take advantage of huge premiums.

[ERICOPOLY]

 

You don't risk ownership in the company if you purchase common instead of your writing these puts.

 

Yes, of course.  I hold X shares as a business owner that I won't touch.  I also write puts for premium that can be used to acquire more shares upon expiration.  The strategy adds to my ownership, doesn't take away from it.  I don't do one or the other, I do both.

 

Writing a put and not purchasing an offsetting call is owning the downside without owning the upside.

 

The guy who is buying your puts (to hedge his added common) has been kicking your ass at this game.

 

In previous posts I've mentioned if the stock is in the $60's I can buy a put to protect gains. 

 

It's important to understand the reason I'm doing this... it's to accumulate shares, not to necessarily profit a ton short-term.  All I have to do writing puts is wait until they expire.  That's it.  What's the point of writing a put at the $45 strike for $5, buying a call at the same strike for $4... and the stock is at $45 at expiration?  I would make $1 instead of $5 on just selling the put.  Eric, I understand your point, but the goal of my strategy is to accumulate shares, not make a killing on price movement.  It gets to the time value of options... I don't want to pay premium for it (unless the stock is in the $60's/$70's, etc. to lock in gains), I'd rather sell the time premium.  We just have a different philosophy on it.

 

I've been writing puts since 2007.  Most of the time, I made a little bit of profit here and there only to get my ass kicked by losing a ton of upside eventually.

 

I once shared your philosophy on it.  Experience has changed my views.

 

And I credit UCCMAL for being a faster learner than I.

 

This is only if you believe SHLD has great upside to begin with. If you are in the middle, that is you dont believe it has much more downside but you also dont think it has major upside, it makes sense to write puts to take advantage of huge premiums.

 

Depends how you measure upside.

 

August:  Stock at $40

September:  Stock at $65

Now:  Stock at $45

 

No upside right?

 

These puts always look most tempting when the premiums are at their peak.  However every time that's happened, you would have made more by purchasing more stock and hedging with the very puts that Luke is writing.

 

And every time it's been at the optimal point for writing covered calls, you would have had greater upside opportunity by selling the stock and waiting for it to drop.

 

The stock is just very volatile and the premiums are high (relative to Coca Cola).  But Coca Cola doesn't move around as much.

 

The common stock moves up and down far more violently than the speed at which these options decay.

[ERICOPOLY]

Additionally, the guy who was shorting it at $60 paid a high annualized borrowing cost... but he didn't have to wait very long for it to drop back to $40.

 

So in absolute terms it didn't cost him very much.

 

The more violent the movements, the less the cost of carry matters to him.

 

He could instead have written a call and purchased a put with the proceeds.  That would have looked like a lower annualized cost to short, but it would have cost him more because that gap between put and call at $60 strike disintegrated quickly as they went deep in the money as the stock travelled to $40.  That disintegration proved to be more expensive than if he had just borrowed the common and paid the high annualized cost of borrow.

 

I've been thinking about this for a while to figure out the mentality of the people who pay these really high premiums.  That's what I came up with.

 

They may look stupid on an annualized cost basis, but they've actually been saving themselves money by doing it this way because the stock's volatility is so high.  It goes from $40 to $60+ and back quite a bit.

 

So like, trying to grab a couple of dollars of profit when it goes to $40 (by writing a put) is leaving a lot of money on the table because the thing rapidly shoots up and the size of these rapid movements outpace the speed at which these puts decay.

[Luke 532]

 

So like, trying to grab a couple of dollars of profit when it goes to $40 (by writing a put) is leaving a lot of money on the table because the thing rapidly shoots up and the size of these rapid movements outpace the speed at which these puts decay.

 

Eric, I'm also buying common with the proceeds.  It's a bullish bet.

[FCharlie]

Wall Street is trying to bury this thing... They smell another batch of redemptions and they want to make it as painful for Eddie and as profitable for themselves as they can.

 

This why he distributed SHLD shares first rather than last.

 

 

[LC]

These puts always look most tempting when the premiums are at their peak.  However every time that's happened, you would have made more by purchasing more stock and hedging with the very puts that Luke is writing.

 

And every time it's been at the optimal point for writing covered calls, you would have had greater upside opportunity by selling the stock and waiting for it to drop.

 

The stock is just very volatile and the premiums are high (relative to Coca Cola).  But Coca Cola doesn't move around as much.

 

The common stock moves up and down far more violently than the speed at which these options decay.

 

Doesn't this thinking assume that SHLD will continue trading up and down between, say, 40 and 60 or so? I mean, if you are long the stock and think it's worth, say, 80/share and think eddie can keep growing it from there....why risk selling @ 60 or writing calls at 60 and losing the entire upside which is the basis for your thesis?

 

 

[ERICOPOLY]

These puts always look most tempting when the premiums are at their peak.  However every time that's happened, you would have made more by purchasing more stock and hedging with the very puts that Luke is writing.

 

And every time it's been at the optimal point for writing covered calls, you would have had greater upside opportunity by selling the stock and waiting for it to drop.

 

The stock is just very volatile and the premiums are high (relative to Coca Cola).  But Coca Cola doesn't move around as much.

 

The common stock moves up and down far more violently than the speed at which these options decay.

 

Doesn't this thinking assume that SHLD will continue trading up and down between, say, 40 and 60 or so? I mean, if you are long the stock and think it's worth, say, 80/share and think eddie can keep growing it from there....why risk selling @ 60 or writing calls at 60 and losing the entire upside which is the basis for your thesis?

 

Oh shit!  It's NOT MY THESIS.

 

Somebody else remarked earlier that he sold calls when it was at $60-$65.  He gave up all the further upside  beyond the strike price in order to earn a rate of decay on the option premium.

 

I'm simply saying that if you are going to give up all the upside, once you've made that decision, then the more optimal move in SHLD has always been to just sell it and get it cheaper soon after.  The movements are so large that there is way more potential than can be found in these premiums.

[ERICOPOLY]

 

So like, trying to grab a couple of dollars of profit when it goes to $40 (by writing a put) is leaving a lot of money on the table because the thing rapidly shoots up and the size of these rapid movements outpace the speed at which these puts decay.

 

Eric, I'm also buying common with the proceeds.  It's a bullish bet.

 

Then you are giving up upside on the large moves -- which is precisely the kind of move that you are fearful of missing out on.

 

Instead, for every put contract, buy an offsetting call contract.  You will be able to get more than a 1:1 upside leverage this way for the amount of downside you are taking on.

 

You are doing something else if you are buying the common with the proceeds -- for every dollar of notional downside you are taking on, you are retaining less than a dollar of notional upside.

[merkhet]

 

Building off of Merket's great work....

 

Here is the Peoria, AZ property info sheet from Seritage: http://www.seritage.com/portals/0/pdf/strip-centers/AZ%20Peoria%20%289406%29%20-%20STRIP%20CENTER%20Leasing%20Plan%20-%20SEPT%202103.pdf

 

Gross leasable area: 104,439

 

Property valuation sheet: http://www.city-data.com/maricopa-county/9/91st-Avenue-16.html

 

Valuation: $7.52MM

 

Valuation/SF: $72

 

 

Now here is Basha's Thunderbird Village in Peoria, AZ: http://www.loopnet.com/Listing/17891059/7518-7586-W-Thunderbird-Rd-Peoria-AZ/

 

Total SF: 82,100

Available SF: 14,473

NNN lease rate on available SF: $18/SF/Year

 

 

If you apply 50% of the Basha lease rate to the Seritage Peoria property, it's worth $13.43MM or $129/SF at a 7% cap rate, nearly double the appraised value.

 

What would be helpful is to have the appraised value of the Basha property in order to reconcile this huge discrepancy, but I cannot seem to find it. At a minimum it demonstrates the potential value in redeveloping these properties and bringing them up to market rates.

 

Were the Seritage Peoria property to be redeveloped for $80/SF and brought up to $18 NNN/SF, at a 7% cap rate the net value would be $18.5MM, or $11MM greater than the appraised value.

 

 

I found the tax assessment for the Basha property. (see attached)

 

Tax Assessed Value: $8,762,700

Basha @ $18/SF & 7% cap @ 83% occupancy: $17.4M

Basha @ $18/SF & 7% cap @ 100% occupancy: $21.1M

 

 

Awesome! Very helpful.

 

If the 67,627 of occupied SF is rented for an average legacy lease rate of $13.50 (75% of the $18), then current NOI is ~$913K - that's a 10.4% cap rate on the $8.76MM appraised value.

 

American Realty Capital Properties (ARCP) has been buying NNN-lease properties at 6 to 8% cap rates, with only smaller portfolios toward the upper end. Using the 7% mid-point, Basha is worth $13.04MM, or ~50% more than the appraised value.

 

 

Seritage has over 200 locations and 18MM SF, which works out to ~90K SF/store. Compare this with SHLD's "core" 400 properties, which average 172K SF/store. (see attached). If you take into account the auto centers, perhaps that would bring Seritage more in line with the "core"....but my guess is that there is not much difference.

 

What I am getting at is that it would be nice to know how many of the core 400 properties are included in the Seritage portfolio.

 

 

My guess is that they're in the Box Split category and not the Strip Center or Multi-Tenant category.

 

Time for some more numbers. I decided to take an hour or two and look up the 9 properties listed under Box Splits -- my guess is that these are profitable stores whose footprint need shrinking.  It might also stand that these are the core/trophy properties, but the correlation between high sales & high RE prices is possibly unclear.

 

Total Assessed Value*: $129,552,123

Total Square Footage: 1,604,785

Avg. $ per Sq. Ft.: $80.73

 

Note that, once again, I put an asterisk (*) on the total valuation because I wasn't able to find the tax information for the following property (though I included the property in the total square footage):

 

(1) 213,298 sq. ft.

4 Smith Haven Mall

Lake Grove, New York

 

Furthermore, if you remove Smith Haven from the calculation of Avg. $ per Sq. Ft., the number jumps to $93.10 per sq. ft. based on tax assessed values.

 

Other fun things to note:

 

Total Sq. Ft. for Box Splits: 1,604,785 sq. ft. or 20.4% (Strip + Box)

Total Sq. Ft. for Strip Center: 6,262,175 sq. ft. or 79.6% (Strip + Box)

 

Me talking out of my ass:

 

Might it be possible that Seritage is meant to be a microcosm for the Sears real estate as a whole?  Most likely the 1:5 core:non-core and 1:5 Box:Strip ratios are just coincidences, but it's fun to talk out of your ass every now and then.

[ERICOPOLY]

So today if you write the Jan put with $44 strike you'll get $4 premium.  You are tying up $40 of your own cash for the potential settlement.  You invest only that $4 premium in the common and the common then goes to $60. 

 

Your $4 premium is now worth $5.35.  Oooohhhh......

 

Instead, just use your $40 of cash and buy the stock for $44.  You'll have $14.54 in profit when it hits $60 per share.

 

Instead of having $5.35, you have $14.54.

 

It's an illusion to think you are making some fat premium by writing the puts -- you give up so much more in exchange.  You make a profit, but incur a large opportunity cost.  I've never seen the stock sit around at the bottom long enough for you to get multiple successive swipes at the option premium before the stock takes off.

 

 

[krazeenyc]

So I for one became a SHLD bull earlier this summer. But when it popped 50% I was happy to unload my whole position. I'm not too worried about losing further upside, if it happens with no warning then so be it -- on to the next company. If the stock pops b/c suddenly the retail operations are profitable or some game changing fundamental change with the company that may be different.

 

The bull case for SHLD is getting to monetize the real estate while ALSO having a successful asset light integrated retail operations ala Amazon.com While Sears/SYW doesn't play in the same league as Amazon, I'd like to invite you guys to try ordering some odds and ends (tools/games for the kids/whatever) from Sears using SYW Max -- they're very efficient.  If orders are mainly being shipped or ordered online there is not much reason to spend capex on stores. I pretty much buy everything online -- other than Amazon, amazingly SYWMax from Sears seems to be the most impressive from a fulfillment standpoint. The website is another thing entirely.

 

Anyways a couple quick things on Seritage. Remember Sears has a deal with Cendant/Avis such that about 150 Avis locations run out of Sears Auto Center locations -- this dates back to 2002 -- perhaps this is why there are so many Auto Centers as part of Seritage. Or perhaps it's b/c they plan to redevelop these Auto Centers to something else.

 

As I've stated in the past, they've got 3 known subleases of Seritage properties (2 to Whole Foods opening 2014 and 1 to Nordstroms Rack coming 2015) coming in .

 

Out of the properties I've seen at Seritage obviously the St Paul development is the most interesting, but also hard to value. Smith Haven is not a great mall (I've never been) but it's not one of the areas better malls but it's in LI and close to the NYC area (which obviously increases the value).  I'm not really sure what Seritage is worth, but the way I look at it .. whatever they can spin out to shareholders without debt or the pension attached is definitely positive (moreso than the property sales that happen within SHLD).

[Luke 532]

So today if you write the Jan put with $44 strike you'll get $4 premium.  You are tying up $40 of your own cash for the potential settlement.  You invest only that $4 premium in the common and the common then goes to $60. 

 

You write 100 contracts and collect $40,000.  You use the $40,000 to buy 909 shares at today's price of $44.  Then you just wait until the stock closes over $44 and let it expire/close it for $0.05.  If it doesn't close above the strike, you roll it forward to the next month, collect another, say $1.00 (so $10,000) and buy another chunk of shares.  Longer it stays down the more shares you accumulate.  When it expires then you're out of the trade with the additional shares.

 

It does help to have a boatload of cash in your account... but the point is you never have to actually use the cash to cover the trade as long as you just roll the puts forward indefinitely.  My account has thanked me abundantly over the years doing this on other stocks.  Again, we're not going to see eye-to-eye on this so I won't comment on this topic again. 

[JBird]

It's like you have the kindest, most beautiful woman sitting at the bar next to you.  She keeps looking at you, and it feels good.  You intend to ask for her number, but you figure it would be a waste to ask her out right now because you estimate you can get a few more minutes of this ego-boosting good feeling of being admired. 

 

She gets a text message that her car has been towed, quickly pays her tab, and hurries out the door.  You don't see her again.  Your excuse was that you were risking nothing, because you got your ego shined for a bit and it was worth the cost of losing her because you intended to get her number if she stayed.

 

Hahaha. Eric, write a book!

 

Instead, for every put contract, buy an offsetting call contract.  You will be able to get more than a 1:1 upside leverage this way for the amount of downside you are taking on.

 

You are doing something else if you are buying the common with the proceeds -- for every dollar of notional downside you are taking on, you are retaining less than a dollar of notional upside.

 

Can you explain like I'm five?

[krazeenyc]

So today if you write the Jan put with $44 strike you'll get $4 premium.  You are tying up $40 of your own cash for the potential settlement.  You invest only that $4 premium in the common and the common then goes to $60. 

 

Your $4 premium is now worth $5.35.  Oooohhhh......

 

Instead, just use your $40 of cash and buy the stock for $44.  You'll have $14.54 in profit when it hits $60 per share.

 

Instead of having $5.35, you have $14.54.

 

It's an illusion to think you are making some fat premium by writing the puts -- you give up so much more in exchange.  You make a profit, but incur a large opportunity cost.  I've never seen the stock sit around at the bottom long enough for you to get multiple successive swipes at the option premium before the stock takes off.

 

Eric, whatever your thoughts on the company....

 

I remember a post from you a while back. It went something like this.

 

It always ....... rallies to at least $60.  :D

[ERICOPOLY]

Longer it stays down the more shares you accumulate.

 

It doesn't stay down long -- that's the whole point.  SHLD has a very wide and violent trading range.

 

You don't write puts at $60, do you?  No, you start getting tempted around these prices.  You do in fact make some money, no doubt about it. 

 

The last time you sit down at that table playing this game is the last time it will be getting down to these levels.  You'll pick up your last dollar or two in premium, and meanwhile the stock will go up $200 bucks.

 

So it's like picking up nickels in front of a steamroller.  It's a steamroller of opportunity cost -- so you just aren't acknowledging it as a cost because you don't notice any of your money missing.

[Luke 532]

 

The last time you sit down at that table playing this game is the last time it will be getting down to these levels.  You'll pick up your last dollar or two in premium, and meanwhile the stock will go up $200 bucks.

 

 

And since I'm using the premium to buy shares, the stock going to $200 hurts me how?  I didn't want to comment again but you're basically making my case for me  :)

[ERICOPOLY]

 

The last time you sit down at that table playing this game is the last time it will be getting down to these levels.  You'll pick up your last dollar or two in premium, and meanwhile the stock will go up $200 bucks.

 

 

And since I'm using the premium to buy shares, the stock going to $200 hurts me how?  I didn't want to comment again but you're basically making my case for me  :)

 

You had $40 in cash that you are using to write covered puts. 

 

You write a put for $1 premium.

 

You invested $1 into the stock.

 

I know I don't have to explain why investing $40 into the stock is going to be more profitable than investing $1 into the stock.  So why do you keep acting like you are making out like a bandit here?

[tombgrt]

 

The last time you sit down at that table playing this game is the last time it will be getting down to these levels.  You'll pick up your last dollar or two in premium, and meanwhile the stock will go up $200 bucks.

 

 

And since I'm using the premium to buy shares, the stock going to $200 hurts me how?  I didn't want to comment again but you're basically making my case for me  :)

 

No he's not? I don't think Ericopoly could be clearer on the whole opportunity cost issue?

 

It can be an ok strategy for stocks with low volatility and no catalysts that you want at a specific price. In this case it's just a terrible waste! Sears has all the potential to jump all over the place and here you are locking in capital for a tiny profit. If you are so sure of your bull case, why not deploy that cash you have to keep back for your written puts in common stock (or hell, leaps!) and play around with that whenever you get a big bounce?

[ERICOPOLY]

 

Instead, for every put contract, buy an offsetting call contract.  You will be able to get more than a 1:1 upside leverage this way for the amount of downside you are taking on.

 

You are doing something else if you are buying the common with the proceeds -- for every dollar of notional downside you are taking on, you are retaining less than a dollar of notional upside.

 

Can you explain like I'm five?

 

SHLD trades at approximately $44 today.

 

Suppose you have $44 in cash.

 

The Feb $44 put contract can be written for $5.35 bid.

The Feb $44 call contract can be purchased for $4.70 ask.

 

The call is cheaper than the put.

 

The upside is cheaper than the downside.  So for every $1 of downside you write, you can purchase more than $1 of upside.

 

Luke is getting penny wise and pound foolish by thinking it will be better to just pocket the premium from the put and invest it in the common.  It looks more profitable than putting it in the call if the price of SHLD stagnates and the call premium deteriorates.  But he also thinks the stock is worth like $200+, so the day the stock hits that price the real cost of his strategy will be plain to see.  Except he then asks how he could possibly be losing out if the stock is up $200.

 

I don't know, perhaps he expects the stock to stagnate forever -- that's where his strategy is optimal.  But it doesn't mesh with his other comments on SHLD where he doesn't want to part with it for $60.

[Luke 532]

I don't know, perhaps he expects the stock to stagnate forever -- that's where his strategy is optimal.  But it doesn't mesh with his other comments on SHLD where he doesn't want to part with it for $60.

 

Of course I don't expect the stock to stagnate forever, but the point of the trade is to get PAID in case it does (I don't have your gift of being a master timer of the market, but I like to profit regardless).  My original post on this topic is below... the entire point of the trade is that it "pays you for waiting" for the SHLD thesis to play out.

 

That's why you write puts that are a month or two out... write them when slightly ITM.  As long as you write them at a low enough strike, you can simply roll them forward indefinitely (and get paid to do it as long as the stock isn't extremely deep ITM at the time of roll) until the volatility sends the stock above the strike at expiration.

 

As long as the stock eventually gets above the strike you do well (doesn't really matter if it's a month from now, 6 months, or a year).  It's a nice strategy for stocks that have a margin of safety, are volatile, and trading in the lower quadrant of their 52-week range.  SHLD fits the bill.  It also pays you for waiting and, in some ways, has you hoping it stays low for awhile as you can collect more premium (and buy more shares) as you roll forward each month.

[peridotcapital]

 

The bull case for SHLD is getting to monetize the real estate while ALSO having a successful asset light integrated retail operations ala Amazon.com

 

 

Well said. The "ALSO" is the key. If they can get to the point where there is strong evidence that the retail side can make a little bit of money (e.g. several hundred million of annual free cash flow consistently) and it is sustainable, I will be on the SHLD equity bandwagon. Until they get there, however, the asset monetizations are just replenishing the capital lost by the retail side... no shareholder value is realized and the intrinsic value per share gets smaller (fewer assets, same number of shares).

 

To me, the most important metric is SHLD net debt. If that trend (rising net debt) can reverse and they can begin a long-term deleveraging process, the equity will make a ton of sense to me.

 

Until that time, I might buy an odd lot of shares in order to attend the annual meeting in the spring (anyone else planning on going this year... it should be fairly interesting given the recent pick-up in corporate activity, right?), but other than that I am on the sidelines and quite skeptical.

[luck]

not sure if this has been posted somewhere on the site, but bishop research and analytics just came out with part two of their valuation of SHLD on seeking alpha today:

 

http://seekingalpha.com/article/1900481-sears-holdings-valuation-part-two-credit-flows-for-subsidiaries-inside-a-permanently-embedded-capital-structure?source=feed

[krazeenyc]

 

The bull case for SHLD is getting to monetize the real estate while ALSO having a successful asset light integrated retail operations ala Amazon.com

 

 

Well said. The "ALSO" is the key. If they can get to the point where there is strong evidence that the retail side can make a little bit of money (e.g. several hundred million of annual free cash flow consistently) and it is sustainable, I will be on the SHLD equity bandwagon. Until they get there, however, the asset monetizations are just replenishing the capital lost by the retail side... no shareholder value is realized and the intrinsic value per share gets smaller (fewer assets, same number of shares).

 

To me, the most important metric is SHLD net debt. If that trend (rising net debt) can reverse and they can begin a long-term deleveraging process, the equity will make a ton of sense to me.

 

Until that time, I might buy an odd lot of shares in order to attend the annual meeting in the spring (anyone else planning on going this year... it should be fairly interesting given the recent pick-up in corporate activity, right?), but other than that I am on the sidelines and quite skeptical.

 

Except if the market even SUSPECTS evidence a retail turnaround combined with a decent ROI on their real estate the stock will be 2x to 3x higher than it is today. (BIG IF OF COURSE).

 

Regarding deleveraging -- if you are like me and look at the pension obligations and the operating lease commitments in the future as debt, they have been deleveraging and in a big way.

[constructive]

Eric - I think your volatility aversion may be at the extreme 1% of value investors. It's not surprising that people might want to use less leveraged/volatile strategies than you do. Even if they are functionally similar by adjusting position size. It's not just analytical but emotional.