Luke 532 Posted February 9, 2014 Share Posted February 9, 2014 Has anyone been able to locate the details of the Baker Street analysis. They referenced a briefing "Softer Hard Assets of Sears" I was not able to find. TIA. Packer Been looking all over for this, tried contacting Baker Street requesting it, and have emailed many of my contacts in the hedge fund world trying to find it. Seems like Baker Street has not publicly released it. If you do somehow find it, please let me know - I'd love to see it Vadim Perelman rarely answers e-mails (I've sent two over the past few months... I'm sure he gets a ton of e-mail) but he has answered his phone in the past (no gatekeeper/receptionist the one time I called). I called him once, and talked to him personally, just to say "thanks" for the quality work he did on "The Case for Sears Holdings." The report you're asking about is probably just for clients, but it can't hurt if you wanted to give him a call... phone: 310-246-0345. If you do, let us know what you find out. Link to comment Share on other sites More sharing options...
moody202 Posted February 9, 2014 Share Posted February 9, 2014 I visited the local Sears store today, and I saw more people than I did ever before. The parking lot is about 50% occupied. It used to be only like 10-20% occupied. They changed most of the price stickers to LED ones, and these are controlled via the computer directly through wifi connection. I talked to a sales, and he said each costs about $8. It is a good investment because printing a new sticker and manually changing it every week is much more expensive. I am glad to see these good signs, though I am not sure what other Sears and Kmart stores do. Interesting....when do you think we will see it reflected in numbers? next quarter? Link to comment Share on other sites More sharing options...
ZenaidaMacroura Posted February 9, 2014 Share Posted February 9, 2014 Has anyone been able to locate the details of the Baker Street analysis. They referenced a briefing "Softer Hard Assets of Sears" I was not able to find. TIA. Packer Been looking all over for this, tried contacting Baker Street requesting it, and have emailed many of my contacts in the hedge fund world trying to find it. Seems like Baker Street has not publicly released it. If you do somehow find it, please let me know - I'd love to see it Vadim Perelman rarely answers e-mails (I've sent two over the past few months... I'm sure he gets a ton of e-mail) but he has answered his phone in the past (no gatekeeper/receptionist the one time I called). I called him once, and talked to him personally, just to say "thanks" for the quality work he did on "The Case for Sears Holdings." The report you're asking about is probably just for clients, but it can't hurt if you wanted to give him a call... phone: 310-246-0345. If you do, let us know what you find out. Lately I've been seeing a ton of people in Sears and JCP in Houston area. Malls in general have been pretty packed anytime the temperature is over 60F. Probably some pent up shopping anytime the weather isn't horrendous. I'm very surprised JCP is having sales problems in its new-format locations... Link to comment Share on other sites More sharing options...
Luke 532 Posted February 9, 2014 Share Posted February 9, 2014 Belk To Renovate Sears Space at Columbiana Mall http://www.wltx.com/news/article/262306/2/Belk-To-Renovate-Sears-Space-at-Columbiana-Mall "Belk says they will relocate their Men's apparel into the renovated Sears space, creating a 50,000 square foot Belk Men's Store." Makes sense to not announce all these deals (Dick's/Pottery Barn/Belk, closing stores, etc.) if you are considering some sort of capital allocation transaction based on an ultra-cheap share price. In the past SHLD stock jumped 5% on news of a 40,000 sq ft deal with Forever 21. Link to comment Share on other sites More sharing options...
adesigar Posted February 9, 2014 Share Posted February 9, 2014 Belk To Renovate Sears Space at Columbiana Mall http://www.wltx.com/news/article/262306/2/Belk-To-Renovate-Sears-Space-at-Columbiana-Mall "Belk says they will relocate their Men's apparel into the renovated Sears space, creating a 50,000 square foot Belk Men's Store." Makes sense to not announce all these deals (Dick's/Pottery Barn/Belk, closing stores, etc.) if you are considering some sort of capital allocation transaction based on an ultra-cheap share price. In the past SHLD stock jumped 5% on news of a 40,000 sq ft deal with Forever 21. Luke are you MarkL777 ? Thanks for all the information you dig up and provide on SHLD. I wish SHLD was more open about all these things happening under the radar (store closings/sales/leases, SYW details, etc) but I guess its partly because Eddie Lampert likes secrecy. Link to comment Share on other sites More sharing options...
Luke 532 Posted February 9, 2014 Share Posted February 9, 2014 Luke are you MarkL777 ? Thanks for all the information you dig up and provide on SHLD. Yep, my COBF username is based on one of my favorite Bible verses. You must be referring to comments I've made on SA. I consider most of the stuff written on Seeking Alpha to be absolute trash but if there's a decent article (which is rare) I'll post comments on it. I wish SHLD was more open about all these things happening under the radar (store closings/sales/leases, SYW details, etc) but I guess its partly because Eddie Lampert likes secrecy. Eventually it will all come out and be known. Link to comment Share on other sites More sharing options...
Luke 532 Posted February 9, 2014 Share Posted February 9, 2014 Belk To Renovate Sears Space at Columbiana Mall http://www.wltx.com/news/article/262306/2/Belk-To-Renovate-Sears-Space-at-Columbiana-Mall My mistake. Another user pointed out that CBL bought SHLD out of their lease at the Columbiana mall. Link to comment Share on other sites More sharing options...
stahleyp Posted February 9, 2014 Share Posted February 9, 2014 While nothing noteworthy, it does give a glimpse as to the public's mindset (thought I think most of us already know). A couple quotes from Morningstar users. Grget wrote, "I've held on for seven years. Hardest to own? Yes. Worth it? Maybe, maybe not. When is Berkowitz going to admit that Sears Holdings (SHLD) and St. Joe (JOE) are dogs? [The fund is] overconcentrated. You should own it like a stock holding, not a fund." Weiwentg, for one, has thrown in the towel. "Fairholme recently got too hard for me to hold," this investor wrote. "I think that Berkowitz's investment in Sears has a decent chance of going to zero. He is taking on too much risk, in my opinion. I worry that somewhere, his risk management has totally failed. Fairholme was worth it over my holding period, but not anymore." http://news.morningstar.com/articlenet/article.aspx?id=634290 Link to comment Share on other sites More sharing options...
adesigar Posted February 9, 2014 Share Posted February 9, 2014 While nothing noteworthy, it does give a glimpse as to the public's mindset (thought I think most of us already know). A couple quotes from Morningstar users. Grget wrote, "I've held on for seven years. Hardest to own? Yes. Worth it? Maybe, maybe not. When is Berkowitz going to admit that Sears Holdings (SHLD) and St. Joe (JOE) are dogs? [The fund is] overconcentrated. You should own it like a stock holding, not a fund." Weiwentg, for one, has thrown in the towel. "Fairholme recently got too hard for me to hold," this investor wrote. "I think that Berkowitz's investment in Sears has a decent chance of going to zero. He is taking on too much risk, in my opinion. I worry that somewhere, his risk management has totally failed. Fairholme was worth it over my holding period, but not anymore." http://news.morningstar.com/articlenet/article.aspx?id=634290 Some people should just buy index funds. People buying FAIRX should do more research. I recall in 92 or so he invested in WFC it was a 33% position and he said if it kept dropping he would make it his ONLY position. He will also hold for very long periods of time as long as he keeps rechecking his thesis and the answer comes back the same. HIs investment horizon/portfolio concentration is like Buffett(Early Years) and Lampert. That's why these 3 guys (Buffet, Lampert, Berkowitz) are 70% of my portfolio. As you can see I love overconcentrated portfolios and diworse ones ? Link to comment Share on other sites More sharing options...
Mephistopheles Posted February 9, 2014 Share Posted February 9, 2014 Screen print of SHLD debt. Notice HoldCo debt is trading above 90.... there is a theory out there that he will bankrupt the SRAC subsidiary while keeping the holdco intact. But I don't think he does that. Because even if he just puts that one sub in CH 11, the media is going to crucify him and all you will read is "Sears is going bankrupt", even though technically that would be false. And this negative media exposure would send a very bad message to vendors, creditors, and customers, creating a negative feedback loop. If this theory has any credence, the SRAC debt may be undervalued. I have the same theory and own the 2017 SRAC debt accordingly. Bankrupting SRAC makes no sense to me given the small amount of debt they have and how the maturities are staggered ($43M in 2017, $69M in 2027, $72M in 2028, and $116M in 2032). I just don't see the upside if you factor in the negative press. His borrowing costs go up right away if he shows he is willing to BK a subsidiary just to avoid paying $43M back. Hey Chad, where do you find details of the maturities and repayments? Link to comment Share on other sites More sharing options...
ERICOPOLY Posted February 9, 2014 Share Posted February 9, 2014 He will also hold for very long periods of time as long as he keeps rechecking his thesis and the answer comes back the same. His thesis is at least partly incorrect. Looking at slide 16, he lists six catalysts: http://www.fairholmefunds.com/sites/default/files/120815%20SHLD%20Presentation.pdf Case-Shiller Index, Home Sales, Housing Starts, Residential Investment, Unemployment Rate. I've listed five out of his six "catalysts" that have all improved, has SHLD's operations taken off???? It seems clear that he expected SHLD to improve with the economy -- it got worse! Link to comment Share on other sites More sharing options...
Luke 532 Posted February 9, 2014 Share Posted February 9, 2014 He will also hold for very long periods of time as long as he keeps rechecking his thesis and the answer comes back the same. His thesis is at least partly incorrect. Looking at slide 16, he lists six catalysts: http://www.fairholmefunds.com/sites/default/files/120815%20SHLD%20Presentation.pdf Case-Shiller Index, Home Sales, Housing Starts, Residential Investment, Unemployment Rate. I've listed five out of his six "catalysts" that have all improved, has SHLD's operations taken off???? It seems clear that he expected SHLD to improve with the economy -- it got worse! Yet he keeps buying quarter after quarter (economy and housing has been improving for multiple quarters). I think his real thesis is the real estate. In interviews for the past 3 years I've always gotten that impression and anything that was retail was just a bonus. Link to comment Share on other sites More sharing options...
adesigar Posted February 9, 2014 Share Posted February 9, 2014 Yet he keeps buying quarter after quarter (economy and housing has been improving for multiple quarters). I think his real thesis is the real estate. In interviews for the past 3 years I've always gotten that impression and anything that was retail was just a bonus. Yup that's what ive gotten from all his interviews as well. For SHLD value of assets (Subsidiaries, Real Estate, Net Inventory) is far in excess of stock price. Its run by a brilliant guy. Downside is protected in case something happens to Lampert. Upside can be anything from break even to the next Berkshire Hathaway(which he still believes). He likes those odds. I believe SHLD is a Jockey stock with downside protection incase something happens to the jockey. Eddie Lampert went from Next Warren Buffett and a Genius to worst CEO (like Berkowitz went from Fund Manager of the Decade to being criticized for his investments AIG, BAC etc ). I remember people having a similar reaction about FAIRX are they are having for SHLD now. He was crazy, he didn't know what he was doing. Investors gave up on him and pulled tons of money out of his fund which dropped from 20 Billion to 5-6 Billion. Its all familiar. It happened to Berkowitz and is now happening to Lampert. I added to Fairholme when it was down and now Im adding to SHLD. Link to comment Share on other sites More sharing options...
peridotcapital Posted February 9, 2014 Share Posted February 9, 2014 Screen print of SHLD debt. Notice HoldCo debt is trading above 90.... there is a theory out there that he will bankrupt the SRAC subsidiary while keeping the holdco intact. But I don't think he does that. Because even if he just puts that one sub in CH 11, the media is going to crucify him and all you will read is "Sears is going bankrupt", even though technically that would be false. And this negative media exposure would send a very bad message to vendors, creditors, and customers, creating a negative feedback loop. If this theory has any credence, the SRAC debt may be undervalued. I have the same theory and own the 2017 SRAC debt accordingly. Bankrupting SRAC makes no sense to me given the small amount of debt they have and how the maturities are staggered ($43M in 2017, $69M in 2027, $72M in 2028, and $116M in 2032). I just don't see the upside if you factor in the negative press. His borrowing costs go up right away if he shows he is willing to BK a subsidiary just to avoid paying $43M back. Hey Chad, where do you find details of the maturities and repayments? The E*Trade web site. Not sure how it is with other online brokerage sites, but when I look at the various SRAC debt securities that trade it lists the original issuance amount as well as how much remains outstanding. Link to comment Share on other sites More sharing options...
bmichaud Posted February 9, 2014 Share Posted February 9, 2014 RE values have improved immensely since 2009. Just look at REIT rental charts and cap rates. Link to comment Share on other sites More sharing options...
ERICOPOLY Posted February 9, 2014 Share Posted February 9, 2014 He will also hold for very long periods of time as long as he keeps rechecking his thesis and the answer comes back the same. His thesis is at least partly incorrect. Looking at slide 16, he lists six catalysts: http://www.fairholmefunds.com/sites/default/files/120815%20SHLD%20Presentation.pdf Case-Shiller Index, Home Sales, Housing Starts, Residential Investment, Unemployment Rate. I've listed five out of his six "catalysts" that have all improved, has SHLD's operations taken off???? It seems clear that he expected SHLD to improve with the economy -- it got worse! Yet he keeps buying quarter after quarter (economy and housing has been improving for multiple quarters). I think his real thesis is the real estate. In interviews for the past 3 years I've always gotten that impression and anything that was retail was just a bonus. It appears a bonus can be negative in value. Link to comment Share on other sites More sharing options...
bargainman Posted February 10, 2014 Share Posted February 10, 2014 Yet he keeps buying quarter after quarter (economy and housing has been improving for multiple quarters). I think his real thesis is the real estate. In interviews for the past 3 years I've always gotten that impression and anything that was retail was just a bonus. Yup that's what ive gotten from all his interviews as well. For SHLD value of assets (Subsidiaries, Real Estate, Net Inventory) is far in excess of stock price. Its run by a brilliant guy. Downside is protected in case something happens to Lampert. Upside can be anything from break even to the next Berkshire Hathaway(which he still believes). He likes those odds. I believe SHLD is a Jockey stock with downside protection incase something happens to the jockey. Eddie Lampert went from Next Warren Buffett and a Genius to worst CEO (like Berkowitz went from Fund Manager of the Decade to being criticized for his investments AIG, BAC etc ). I remember people having a similar reaction about FAIRX are they are having for SHLD now. He was crazy, he didn't know what he was doing. Investors gave up on him and pulled tons of money out of his fund which dropped from 20 Billion to 5-6 Billion. Its all familiar. It happened to Berkowitz and is now happening to Lampert. I added to Fairholme when it was down and now Im adding to SHLD. Two things to consider. first of all Eddie Lampert as a jockey, remember this jockey is actually jumping from horses to elephants, so to speak. it's different running a hedge fund than running a company much less a retail company. That's why great investors do not necessarily make great operators and vice versa. I'm not saying he cant be successful at it, but we must realize that it is not the same thing he was doing before. With regards to fair holme and Berkowitz, remember that a lot of that was actually due to his fund's net asset value collapsing, not just people pulling out of his fund. A lot of that was also due to the fact that he did not close the fund when he really should have... Link to comment Share on other sites More sharing options...
ni-co Posted February 10, 2014 Share Posted February 10, 2014 I spent the last few days reading this thread from beginning to end I don't get the Wall Street opinion on SHLD. For all we know, ESL is going to spin-off/sell off LE and auto centers this year. That's more or less official. LE is worth at least $7.50/share, auto centers $ 5/share. Then, there is this 51 % stake in Sears Canada trading at about $6.50/share. This is $19/share of highly visible value in SHLD. I'm not talking about RE, brands or pension liabilities. How can any "analyst" in his right mind state a SHLD price target of $20? What did this CS "analyst" "analyze"? Please help me out. Link to comment Share on other sites More sharing options...
20ppy Posted February 10, 2014 Share Posted February 10, 2014 There are so many intelligent value investors on this board, hope they can give you better perspectives. I will just say that the Market is definitely not efficient. Link to comment Share on other sites More sharing options...
adesigar Posted February 10, 2014 Share Posted February 10, 2014 I spent the last few days reading this thread from beginning to end I don't get the Wall Street opinion on SHLD. For all we know, ESL is going to spin-off/sell off LE and auto centers this year. That's more or less official. LE is worth at least $7.50/share, auto centers $ 5/share. Then, there is this 51 % stake in Sears Canada trading at about $6.50/share. This is $19/share of highly visible value in SHLD. I'm not talking about RE, brands or pension liabilities. How can any "analyst" in his right mind state a SHLD price target of $20? What did this CS "analyst" "analyze"? Please help me out. Simple answer they didn't analyze. You viewed it as a Holdings company with a collection of assets/subsidiaries that are independednt of each other. They view it as a Retail company which has Same Store Sales, and earnings to which they need to apply a multiple to get a number. Link to comment Share on other sites More sharing options...
adesigar Posted February 10, 2014 Share Posted February 10, 2014 Article from last month. I read it then and was going to post it but forgot. Came across it again today. Not sure if anyone else posted it. If someone did post it sorry for the repost. http://www.nytimes.com/2014/01/13/business/ge-capital-to-help-set-up-loyalty-programs-for-retailers.html?_r=0 Link to comment Share on other sites More sharing options...
dutchman Posted February 10, 2014 Share Posted February 10, 2014 Why does no one care that they're burning through 10$/share per year just to keep retail alive. Is it irrational to worry about this? Link to comment Share on other sites More sharing options...
ni-co Posted February 10, 2014 Share Posted February 10, 2014 Why does no one care that they're burning through 10$/share per year just to keep retail alive. Is it irrational to worry about this? One has to care, absolutely. However, is Lampert really burning 10$/share per year, when most of it are contributions to an underfunded pension fund? A fund that might not look as underfunded as now, when interest rates revert back to the mean? Adesigar, That's what I was getting at. My point is that these 3 businesses are non-core for the retail business of SHLD. Lampert can spin them off to shareholders (or sell them) without any major repercussions for the SHLD retail business. As an aside, Lampert will load them with at least some debt before spinning them off (500 m in the case of LE). I saw some SHLD asset value calculations here where this debt has not been subtracted from SHLD debt. This is, however, double counting some of the (consolidated) debt of SHLD. Lastly, the fact that the guarantor/non-guarantor structure doesn't play a large role in case of bankruptcy of SHLD doesn't mean that it's not important. As some of you guys pointed out in this thread, it's all about being able to spin off the valuable assets of SHLD or at least having the flexibility of doing it, at any time. And in this context it's very important. As far as I can remember that is one of the reasons why JCP is not able to spin-off its RE into a REIT. Lampert structured Sears Holdings as a holding company. And even within the retail part of the business he reportedly divided it into several smaller businesses so that he can move these parts around as he sees fit. To me, "game of Jenga" doesn't seem to fit as the right analogy, here. It's more like playing LEGO – and SHLD capex shows you that Lampert is very cautious not to destroy any of the parts. Link to comment Share on other sites More sharing options...
Luke 532 Posted February 10, 2014 Share Posted February 10, 2014 Somewhat interesting that liquidation sales at closed stores aren't rock-bottom prices. Perhaps that's contributing to SHLD being able to make so much money from store closures. http://www.philly.com/philly/news/local/20140210_Gallery_Kmart_begins_its_long_goodbye.html "I'm trying to get everything I can," she said, "But this is not a good sale." She hushed for a moment to eavesdrop on a man who had intercepted one of the store managers. "When is the store closing?" the shopper asked. "When everything is gone," the manager said. "Near the end of April." Bell sighed in frustration. The perversity of a liquidation sale, she said, is that by the time the discounts get steeper, most of the good stuff is gone. Nearby, a large photograph of Jaclyn Smith looked down on a display of Teenage Mutant Ninja Turtle twin-size comforters, on sale for $32.99. David Rodea, a construction worker from Camden who made the trip with his wife and three children, said they, too, were disappointed at the anemic bargains. "If it had been a 40 or 50 percent discount, that would have been good," he said. Link to comment Share on other sites More sharing options...
20ppy Posted February 10, 2014 Share Posted February 10, 2014 http://finance.yahoo.com/news/curbside-convenience-sears-introduces-vehicle-150000781.html Interesting , Sears now has a platform to provide more and more services … Link to comment Share on other sites More sharing options...
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