SHLDQ - Sears Holdings Corp

[ShahKhezri]

That's interesting, so I guess he sold the SHOS warrants. 

[texual]

ESL partners also reported and have sold 13.5m shares of Autonation. They've also sold about every share of AZO. No more NFLX. The GAP stake is around 400 million, down by a lot since owning it. As it stands the hedge fund is dominated by two stocks, SHLD and AN ~1.5 billion each. The way things are going it appears SHLD could be the last stock in the portfolio.

 

Bruce Berkowitz increased his stake in SHLD and now owns 17.1%

 

[Parsad]

ESL partners also reported and have sold 13.5m shares of Autonation. They've also sold about every share of AZO. No more NFLX. The GAP stake is around 400 million, down by a lot since owning it. As it stands the hedge fund is dominated by two stocks, SHLD and AN ~1.5 billion each. The way things are going it appears SHLD could be the last stock in the portfolio.

 

Bruce Berkowitz increased his stake in SHLD and now owns 17.1%

 

How many of you think that this thing is going private pretty soon?  Cheers!

[Guest wellmont]

I don't. but I suspect his is going to get way more proactive in creating value.

[valuecfa]

ESL partners also reported and have sold 13.5m shares of Autonation. They've also sold about every share of AZO. No more NFLX. The GAP stake is around 400 million, down by a lot since owning it. As it stands the hedge fund is dominated by two stocks, SHLD and AN ~1.5 billion each. The way things are going it appears SHLD could be the last stock in the portfolio.

 

Bruce Berkowitz increased his stake in SHLD and now owns 17.1%

 

How many of you think that this thing is going private pretty soon?  Cheers!

 

Would likely be to the detriment of shareholders that have been in the company for a while if it were to occur.

[biaggio]

ESL partners also reported and have sold 13.5m shares of Autonation. They've also sold about every share of AZO. No more NFLX. The GAP stake is around 400 million, down by a lot since owning it. As it stands the hedge fund is dominated by two stocks, SHLD and AN ~1.5 billion each. The way things are going it appears SHLD could be the last stock in the portfolio.

 

Bruce Berkowitz increased his stake in SHLD and now owns 17.1%

 

How many of you think that this thing is going private pretty soon?  Cheers!

 

Don t both Berkowitz and Lampert live in Miami? Maybe they will team up and use SHLD as their investment vehicle and not have to worry about lock ups, fund withdrawls, etc---assets would be pretty illiquid so I would think this would be unlikely.

 

 

 

[Parsad]

ESL partners also reported and have sold 13.5m shares of Autonation. They've also sold about every share of AZO. No more NFLX. The GAP stake is around 400 million, down by a lot since owning it. As it stands the hedge fund is dominated by two stocks, SHLD and AN ~1.5 billion each. The way things are going it appears SHLD could be the last stock in the portfolio.

 

Bruce Berkowitz increased his stake in SHLD and now owns 17.1%

 

How many of you think that this thing is going private pretty soon?  Cheers!

 

Don t both Berkowitz and Lampert live in Miami? Maybe they will team up and use SHLD as their investment vehicle and not have to worry about lock ups, fund withdrawls, etc---assets would be pretty illiquid so I would think this would be unlikely.

 

That's kind of what I'm thinking.  Bruce said "stay tuned!"  Cheers!

[BargainValueHunter]

ESL partners also reported and have sold 13.5m shares of Autonation. They've also sold about every share of AZO. No more NFLX. The GAP stake is around 400 million, down by a lot since owning it. As it stands the hedge fund is dominated by two stocks, SHLD and AN ~1.5 billion each. The way things are going it appears SHLD could be the last stock in the portfolio.

 

Bruce Berkowitz increased his stake in SHLD and now owns 17.1%

 

How many of you think that this thing is going private pretty soon?  Cheers!

 

The way I think Sears works out after three years of really nothing so far is that one day, Eddie Lampert will own one share, and Fairholme Capital Management will own one share for our shareholders, and that's it, and we'll split the pie.

 

Bruce Berkowitz, 2011 Morningstar Panel Discussion

[ShahKhezri]

I bought 10 times in the month of January and it's at the level I stated earlier in this thread it would become (12.5%) at an avg. of 43.50. 

 

I think the real estate and inventory is often the focus with SHLD.  I messed around for almost 3 weekends and did different valuation scenarios.  He doesn't make it easy because the numbers aren't broken out.  For simplicity, suppose 20% of total sales are related to KCD....do different breakouts of 40/40/20 or whatever...and start putting p/s multiples based on comps (WHR, SWK)...you're pretty much starting a fictitious brand company (that's the going concern) whereas the often mentioned real estate/inventory liquidation (is the liquidation - obviously).

 

Add Land's End at half what they bought it for if you think it's a pos ($1bn) - which they will rid of soon. 

 

Sear's comps positive, zero debt maturity until 2015-16, pension - less of an issue. 

 

You can get comfortable pretty fast...it takes time to sensitize the p/s and different scenarios.  Look at the new faces at the company...see their body of work...and yes for me a short squeeze has always been a catalyst. 

 

Also with the real estate valuation, I haven't done the work...I know another poster here mentioned they would...again if you simplify and follow the 80/20 rule, just focus on the locations in the top 20 city's...you don't need the whole picture...just enough to let you be comfortable is what I do. 

[txlaw]

Not sure whether Bruce B and ESL would team up.  That would be very interesting, as they are both the most WEB/Munger-like value guys out there, IMO.

 

I think that if I were a billionaire money manager that was averse to paying more taxes, now would be a good time to put into place my "tax laundering" strategy, as Ericopoly would put it, for the following reasons:

 

-Personal income taxes almost certainly to go up going forward

-Carried interest loophole ought to go away

-Corporate taxes could possibly go down

-NOLs are plentiful at some companies and can be used to shelter corporate income, including financial investment-related income (anyone want to start an insurance co?), when turning the ships around or transforming them

-Debt capital for acquisitions and working capital is cheapest we might see in the US for a long time (maybe our life times)

 

So maybe "tax laundering" is an additional reason for these guys to shut down their funds and get permanent capital.  I love this word, btw, which I believe Ericopoly may have coined.

[muscleman]

Not sure whether Bruce B and ESL would team up.  That would be very interesting, as they are both the most WEB/Munger-like value guys out there, IMO.

 

I think that if I were a billionaire money manager that was averse to paying more taxes, now would be a good time to put into place my "tax laundering" strategy, as Ericopoly would put it, for the following reasons:

 

-Personal income taxes almost certainly to go up going forward

-Carried interest loophole ought to go away

-Corporate taxes could possibly go down

-NOLs are plentiful at some companies and can be used to shelter corporate income, including financial investment-related income (anyone want to start an insurance co?), when turning the ships around or transforming them

-Debt capital for acquisitions and working capital is cheapest we might see in the US for a long time (maybe our life times)

 

So maybe "tax laundering" is an additional reason for these guys to shut down their funds and get permanent capital.  I love this word, btw, which I believe Ericopoly may have coined.

 

That would sound like a better idea if they buy AIG together. SHLD is harder because the liquidation takes a long time to complete.

If they buy AIG together and let AIG install them as the Chief Investment Officer, imagine how that would work out. ;)

[biaggio]

I bought 10 times in the month of January and it's at the level I stated earlier in this thread it would become (12.5%) at an avg. of 43.50. 

 

I think the real estate and inventory is often the focus with SHLD.  I messed around for almost 3 weekends and did different valuation scenarios.  He doesn't make it easy because the numbers aren't broken out.  For simplicity, suppose 20% of total sales are related to KCD....do different breakouts of 40/40/20 or whatever...and start putting p/s multiples based on comps (WHR, SWK)...you're pretty much starting a fictitious brand company (that's the going concern) whereas the often mentioned real estate/inventory liquidation (is the liquidation - obviously).

 

Add Land's End at half what they bought it for if you think it's a pos ($1bn) - which they will rid of soon. 

 

Sear's comps positive, zero debt maturity until 2015-16, pension - less of an issue. 

 

You can get comfortable pretty fast...it takes time to sensitize the p/s and different scenarios.  Look at the new faces at the company...see their body of work...and yes for me a short squeeze has always been a catalyst. 

 

Also with the real estate valuation, I haven't done the work...I know another poster here mentioned they would...again if you simplify and follow the 80/20 rule, just focus on the locations in the top 20 city's...you don't need the whole picture...just enough to let you be comfortable is what I do.

 

ShahK I have a very small amount I bought in the $68 range- I would like to average down but how do you get comfortable with the $17+b in debt it has.

[wisdom]

Total liabilities are at $17B. Long term debt is $2B. Look at the holding company structure. The debt is guaranteed by subsidiaries.

[biaggio]

Total liabilities are at $17B. Long term debt is $2B. Look at the holding company structure. The debt is guaranteed by subsidiaries.

 

Thanks for the reply.

 

Debt may be guaranteed by subs, but SHLD ultimately responsible as well, no?

 

I just would like to see more assets on the other side of the balance sheet. I understand that a lot are hidden like the real estate.

 

Comfortable with LTD of $2B

 

The other ~$15B = $10.7B current debt + Pension Liability $2.26B + other long term debt of $2.14B

 

vs

 

current assets of  $11.28b

property              $ 6.17B

other                  $  .78B

 

Total of about $18B in assets

 

plus the value of the hidden assets-mainly the real estate +/- brand value

 

This seems like a lot of leverage. Leverage would be good if we had a great underlying business, but we have the added risk of declining business.

 

I am cognizant of the fact that  when (and/or if) the balance sheet is cleaned up the price of the stock will be north of where it is today.

 

Intrigued by involvement of BB and E.Lampert. I would love this to turn into jockey/asset allocator/compounder + be rid of the retail. I would love to invest along side these guys rather than be bought out in a privatization.

 

[Mephistopheles]

After the dell fiasco, I've become skeptical. What if Eddie and Bruce decide to team up and steal this company from shareholders? I think both are very smart people and it seems like taking it private or using it as an investment vehicle is a real possibility, but I can't help but be hesitant.

[txlaw]

After the dell fiasco, I've become skeptical. What if Eddie and Bruce decide to team up and steal this company from shareholders? I think both are very smart people and it seems like taking it private or using it as an investment vehicle is a real possibility, but I can't help but be hesitant.

 

Bruce B wouldn't do that.  That much I'm sure of.

 

I doubt ESL would do that either, but I was totally wrong about Michael Dell on that front, so take my opinion on ESL with a grain of salt.

[BargainValueHunter]

After the dell fiasco, I've become skeptical. What if Eddie and Bruce decide to team up and steal this company from shareholders? I think both are very smart people and it seems like taking it private or using it as an investment vehicle is a real possibility, but I can't help but be hesitant.

 

Lampert, Berkowitz, Chou and Stahl already own ~ 62% of the company and 8,552,896 shares are sold short so I don't see how we get into a Dell situation.

[Guest wellmont]

After the dell fiasco, I've become skeptical. What if Eddie and Bruce decide to team up and steal this company from shareholders? I think both are very smart people and it seems like taking it private or using it as an investment vehicle is a real possibility, but I can't help but be hesitant.

 

what evidence do you have that they've even met? Bruce runs a mutual fund. they can't take things private.  right now esl is actually just trying to create some + shareholder value. because shld has been burning cash and destroying value. the business is performing poorly. lots of problems. too many moving parts. unpredictable cash flows. not the kind of business you take private. some of their debt trades at 55c on the dollar, signaling that esl needs to deleverage, not add leverage in a going private transaction. the interest rate to take it private would be too high. so many reason why it won't happen. I wish there were as many reasons why the business will improve.

[premfan]

I closed my sear position last year due to a couple things:

 

1.) There is no catalyst. Only speculation that Eddie L. will start using cash to diversify from retail and create the next berkshire hathaway. I'm not saying this wont happen but, i cant really base an investment thesis on "hope".

 

2.) The retail business was worse than i thought. I assumed he would shut down more stores and create income from the real estate at a quicker pace.  I was wrong.

 

All in all its a safe stock. Cause there is a clear floor. There are a ton of great investors in the stock and i'm sure in the long term value will be created. I just had to put it in the too hard pile for now.

 

 

[texual]

Michael dell said in 2009 that he wanted to go private. I'm not kidding he actually said that. So I always knew what dell would do. I listen to every word of Bruce berkowitz and Eddie lampert and see nothing remotely close to suggesting they go private. If anything they are going private in their funds and planning to work on investment vehicles. Read their comments on sears.

 

There's a lot of reasons that if you consider all the investments of these two men, that ultimately, sears will become a holdings company that has no choice but to diversify with investments. Who better to control a organizations cash flow than esl or bb?

 

The natural and logical consequences of their ownership suggest they are interested in a partnership where sears is private capital and they run it. Problems solved. They live in Florida a few miles away from each other and have no interest in communications with anyone outside the value investor community. I'm eager to see the letter from SHLD in a few days.

[ERICOPOLY]

I listen to every word of Bruce berkowitz and Eddie lampert and see nothing remotely close to suggesting they go private. If anything they are going private in their funds and planning to work on investment vehicles. Read their comments on sears.

 

Plus, how would taking it private be the right deal for the Fairholme Fund shareholders?  A mediocre one-time pop is not how Bruce B typically seems to invest.  He's supposed to be looking out for their best interests.

 

[texual]

These are honorable men and the last thing they want is a tarnished reputation. Fairholme funds are pretty risky depending on your aversions (not to me) but I can understand the uncertainty with SHLD. But heres food for thought.

 

Berkowitz has essentially three 'chess piece' moves going forward. Stay tuned as he says.

 

1. He retreats to St. Joe since hes already chairman. He doesn't talk about JOE anymore, if you have noticed. No case studies, no commentary in interviews. Hes quiet about the prospects. But if you read into his past statements youll know that he sees it as a great vehicle for further acquisitions and illiquid assets.

 

2. He retreats to Sears Holdings along with his buddy ESL. Theres a few great things about that move, but I do not know if Bruce sees himself as the second guy. Is Eddie Lampert: Warren Buffett as Bruce Berkowitz: Charlie Munger? I don't know enough to say he would be cool with that. But this is the most exciting and financially beneficial move (to me).

 

3. He opens a private hedge fund for partners with 1 million minimums, a five year lock up, and 2/20 style management fees. This is by far the least appealing for several reasons. I don't think we as FAIRX owners get any benefit. Nor do we as owners of the companies he owns. Its a private fund, he can do whatever he likes and it lacks transparency. Not to mention he should have entered this space about 20 years ago. It just seems too little, too late for a guy his age to begin dabbling in starting a hedge fund. But you never know.

 

And I guess the last possible prospect is that he just retreats to running his mutual fund and nothing special happens for a long while and his plans just fall by the wayside. I don't think he would tell us to stay tuned if nothing was around the corner. Hes obviously planning on a longer term, private capital vehicle such as Sears, and wants the flexibility of a hedge fund.

 

What do you think?

[Liberty]

2. He retreats to Sears Holdings along with his buddy ESL. Theres a few great things about that move, but I do not know if Bruce sees himself as the second guy. Is Eddie Lampert: Warren Buffett as Bruce Berkowitz: Charlie Munger? I don't know enough to say he would be cool with that. But this is the most exciting and financially beneficial move (to me).

 

I don't know the personalities involved enough to judge, but maybe this could turn into more of a Cummings-Seinberg dynamic than Buffett-Munger. That would certainly be interesting to see.

[Matson125]

According to this article he is infact raising partnership money

http://www.advisorone.com/2013/02/04/fairholmes-berkowitz-hints-at-mutual-fund-exit

 

 

[wisdom]

Based on his past record - Eddie is unlikely to take SHLD pvt. He is not Michael Dell.

 

According to Bruce - he has hardly had any contact with Eddie. So, I do not see most of the partnership scenarios playing out.

 

SHLD is cheap with a smart money manager in charge and there is no way SHLD goes into bankruptcy. Something good will happen over time.

 

You either trust Eddie and his skills like Buffett or Watsa or else this is not for you.