SHLDQ - Sears Holdings Corp

[enoch01]

Sort of interesting to me that they would need to hire two investment banks to evaluate the options for those assets.  Presumably those options would have been under evaluation since at least the process surrounding creation of the bonds secured by the IP underlying those businesses.  So, for like the last decade?

 

Maybe CYA to bolster position in case arguments about whether SHLD obtained highest and best value/use arise whatever the posture.  Maybe just a mad scramble for cash, which inference would be sort of supported by CFO bailing.

 

Fairholme has had enough.

[doughishere]

Sort of interesting to me that they would need to hire two investment banks to evaluate the options for those assets.  Presumably those options would have been under evaluation since at least the process surrounding creation of the bonds secured by the IP underlying those businesses.  So, for like the last decade?

 

Maybe CYA to bolster position in case arguments about whether SHLD obtained highest and best value/use arise whatever the posture.  Maybe just a mad scramble for cash, which inference would be sort of supported by CFO bailing.

 

Fairholme has had enough.

 

Thats what I was going to say. Fairholme has been active lately.

[merkhet]

Sort of interesting to me that they would need to hire two investment banks to evaluate the options for those assets.  Presumably those options would have been under evaluation since at least the process surrounding creation of the bonds secured by the IP underlying those businesses.  So, for like the last decade?

 

Maybe CYA to bolster position in case arguments about whether SHLD obtained highest and best value/use arise whatever the posture.  Maybe just a mad scramble for cash, which inference would be sort of supported by CFO bailing.

 

It's possible they're trying to figure out if they'll get more money via an IPO or via a rights offering. I don't know that they can do a spin at this point. Alternatively, they might try to get enough money to keep themselves afloat for two years from one company while spinning the other company (so that the latter company will escape the fraudulent convenience event horizon). Who knows.

[Eye4Valu]

What I do know is that Lampert/ESL and Berkowitz/Fairholme are heavily incentivized to create additional value via their ownership. Say what you will about SHLD. I doubt either of those two guys like burning money or flushing it down the toilet.

[Matson125]

If you would have told me in 2005 when the merger took place that more than 10 years later that Eddie who at the time was considered one of the best money mangers ever would be still talking about fictitious points and spending his time trying to sell more vacuum cleaners.  I would have called you crazy.

[CorpRaider]

I think the subs/entites holding at least the notes secured by the IP were subject to the PBGC security agreement they filed a month or two back, but I just read it for fun so I'm not sure.

[heth247]

There is a new SA Pro article by Bishop today, anybody read it? I don't have access. It will be interesting to know what he has to say about the transformation.

 

Sears Holdings Valuation: The Transformation by Bishop Research and Analytics

 

[ScottHall]

There is a new SA Pro article by Bishop today, anybody read it? I don't have access. It will be interesting to know what he has to say about the transformation.

 

Sears Holdings Valuation: The Transformation by Bishop Research and Analytics

 

He's been so accurate so far...

[valueinvestor82]

Scott, I sense sarcasm, but make sure when you say such things that you consider the value of each spinoff and right distributed over the last few years. And no, you can't automatically assign zero value to Orchard or $6 to OSH, many of us wisely sold at or close to the peaks of LE/OSH/Orchard and maximized use (or disposal) of the rights. I've owned SHLD 3x in 4 years and made a substantial return each time. Maybe if you buy, hold, and forget about it, a negative assessment may be more understandable.

[ScottHall]

Scott, I sense sarcasm, but make sure when you say such things that you consider the value of each spinoff and right distributed over the last few years. And no, you can't automatically assign zero value to Orchard or $6 to OSH, many of us wisely sold at or close to the peaks of LE/OSH/Orchard and maximized use (or disposal) of the rights. I've owned SHLD 3x in 4 years and made a substantial return each time. Maybe if you buy, hold, and forget about it, a negative assessment may be more understandable.

 

You are right, I didn't account for the uncanny trading abilities that are innate to us as a species. I'm sorry. :(

 

Glad you've made money. I can pretty confidently say that hasn't been the case for the majority of shareholders.

[adesigar]

There is a new SA Pro article by Bishop today, anybody read it? I don't have access. It will be interesting to know what he has to say about the transformation.

 

Sears Holdings Valuation: The Transformation by Bishop Research and Analytics

 

That article is from 2015.

[adesigar]

Scott, I sense sarcasm, but make sure when you say such things that you consider the value of each spinoff and right distributed over the last few years. And no, you can't automatically assign zero value to Orchard or $6 to OSH, many of us wisely sold at or close to the peaks of LE/OSH/Orchard and maximized use (or disposal) of the rights. I've owned SHLD 3x in 4 years and made a substantial return each time. Maybe if you buy, hold, and forget about it, a negative assessment may be more understandable.

 

You are right, I didn't account for the uncanny trading abilities that are innate to us as a species. I'm sorry. :(

 

Glad you've made money. I can pretty confidently say that hasn't been the case for the majority of shareholders.

 

I think you are both partly right.

 

I have a large SHLD position and at the current price it sucks. But the spinoffs have helped. I did make money on SHOS/LE/SRG/SRSC/SHLDW. I didn't sell them near their peak (except the bonds) but I did sell for quite a bit higher than I paid for them.

[valueinvestor82]

I used the word "wisely" to describe selling near the top for each spinoff (and I participated in SRG at $29.54 or whatever the participation price was, recently selling in the $53 range), but I should have said "luckily." My usual problem is selling too early, but when few potential negatives seem to be priced in and a substantial shorter term rally occurs, I have a hard time hanging on, unless my believed range of NAV is still a long ways off. I actually did sell SHOS quite a ways off from the astronomical high, but it was multiples of its current price. So I didn't sell because of some technical indicator, I got lucky. I don't have uncanny trading abilities, I was just making the point that I don't know any shareholders who actually kept every separated asset "speculating" that their futures would become brighter.

[alpha asset strategies]

"I don't have uncanny trading abilities, I was just making the point that I don't know any shareholders who actually kept every separated asset "speculating" that their futures would become brighter."

 

valueinvestor82-

 

Hasn't Eddie Lampert pretty much hung on to all of the spin-offs, etc. - at least as far as we know?  Wouldn't it be ironic if one of the all-time great investors ended up doing worse than virtually all of the "mere mortal" investors in SHLD and the related spin-offs?

 

Of course, that remains to be seen; perhaps Lampert and Berkowitz can salvage their significant investments in SHLD's and related entities?  I'm betting against the legends on SHLD.  SRG may be a long-term winner.

[DCG]

 

I think the 2 best options for Sears to remain in business long term are:

 

 

1. Shut down all retail stores. Focus on their owned brands - Kenmore, Craftsmen, and Diehard, and sell them fully through other retailers and possibly online. Use the cash from selling off retail store real estate to acquire additional brands and become a holding company of brands (in a similar fashion as Whirlpool) in the tool and appliance space.

 

 

2. Significantly scale down the size of their retail locations (renting out part of the existing locations) and focus on selling hardware and appliances. These are the type of items Sears is typically known for. They can channel all their marketing efforts to those 2 areas. Otherwise, Sears stores contain a large assortment of random products from mostly crappy brands. Who actually goes to Sears to do clothes shopping and buy jewelry, shoes and bedding supplies? Nobody; yet half their store real estate is this stuff. 

 

And with both options, K-Mart should be shut down and liquidates, as their stores are a joke.

 

[redwood]

It looks like fairholme fund bought a lot of shares in last few days (778000 shares) based form 4.

 

Common Shares, $.01 par value  5/27/2016    P (1)   270600  A $13.30  26772348  I  See Footnote  (2)

Common Shares, $.01 par value  5/31/2016    P (3)   6700  A $13.17  26779048  I  See Footnote  (2)

Common Shares, $.01 par value  5/31/2016    P (1)   11500  A $13.20  26790548  I  See Footnote  (2)

Common Shares, $.01 par value  5/31/2016    P (1)   182000  A $13.27  26972548  I  See Footnote  (2)

Common Shares, $.01 par value  6/1/2016    P (1)   280000  A $12.62  27252548  I  See Footnote  (2)

Common Shares, $.01 par value  6/1/2016    P (3)   8900  A $12.51  27261448  I  See Footnote  (2)

Common Shares, $.01 par value  6/1/2016    P (1)   3400  A $12.51  27264848  I  See Footnote  (2)

Common Shares, $.01 par value  6/1/2016    P (1)   14900  A $12.48  27239948  (4) I  See Footnote  (2)

 

 

 

 

 

 

[DCG]

..because he's been so right on this so far.

[Ballinvarosig Investors]

The valuation that Fairholme themselves have for Sears (included in their 2015 annual report) is contradictory and detached from reality.

 

http://www.fairholmefundsinc.com/Reports/FAIRX2015Annual.pdf

 

As you can see from the graphic, they have assigned a real estate value of $15,772bn for the real estate alone. In just a few lines after, they inform us that 1/4 of the real estate value was unlocked for $3.1bn. If you hold to Fairholme's conviction that the overall profile of the remaining is of the same quality (dubious), then the remaining real estate surely only has a value of $9.3bn. Next, Fairholme report a value of $5.15bn for KCD+Sears Home Services. In 2006, maybe this was the case, but today we're looking at brands and business that have been in serious decline for the entire year period. When even other bulls like Chou and Baker Street attach a $2-3bn value, where is Bruce coming with his number? When you have Bruce talking about the current losses as being "voluntary" - you have to question what planet is he living on.

[Ballinvarosig Investors]

By the way - what do people make of the CFO resigning a few days ago?

 

http://www.wsj.com/articles/sears-holdings-cfo-robert-schriesheim-steps-down-1464306956

[peridotcapital]

The valuation that Fairholme themselves have for Sears (included in their 2015 annual report) is contradictory and detached from reality.

 

http://www.fairholmefundsinc.com/Reports/FAIRX2015Annual.pdf

 

As you can see from the graphic, they have assigned a real estate value of $15,772bn for the real estate alone. In just a few lines after, they inform us that 1/4 of the real estate value was unlocked for $3.1bn. If you hold to Fairholme's conviction that the overall profile of the remaining is of the same quality (dubious), then the remaining real estate surely only has a value of $9.3bn. Next, Fairholme report a value of $5.15bn for KCD+Sears Home Services. In 2006, maybe this was the case, but today we're looking at brands and business that have been in serious decline for the entire year period. When even other bulls like Chou and Baker Street attach a $2-3bn value, where is Bruce coming with his number? When you have Bruce talking about the current losses as being "voluntary" - you have to question what planet is he living on.

 

The idea that the cash burn is voluntary will be disproved this year now that Eddie has said his operational priority is getting to profitability this year. In Q1 alone they burned more than $700 million. That loss was voluntary, but only in the sense that he insists on choosing to continue to run the retail operation into the ground.

[tede02]

Has there been any consideration to take the company private?  That would ease a lot of the public pressure on Lampert and Berkowitz. 

[TwoCitiesCapital]

Has there been any consideration to take the company private?  That would ease a lot of the public pressure on Lampert and Berkowitz.

 

I imagine anyone who has remained a shareholder through all of this would cry foul...

 

 

[BeerBBQ]

The valuation that Fairholme themselves have for Sears (included in their 2015 annual report) is contradictory and detached from reality.

 

http://www.fairholmefundsinc.com/Reports/FAIRX2015Annual.pdf

 

As you can see from the graphic, they have assigned a real estate value of $15,772bn for the real estate alone. In just a few lines after, they inform us that 1/4 of the real estate value was unlocked for $3.1bn. If you hold to Fairholme's conviction that the overall profile of the remaining is of the same quality (dubious), then the remaining real estate surely only has a value of $9.3bn. Next, Fairholme report a value of $5.15bn for KCD+Sears Home Services. In 2006, maybe this was the case, but today we're looking at brands and business that have been in serious decline for the entire year period. When even other bulls like Chou and Baker Street attach a $2-3bn value, where is Bruce coming with his number? When you have Bruce talking about the current losses as being "voluntary" - you have to question what planet is he living on.

 

Isn't the $15B value for all of the real estate and the $9B for the owned real estate - i.e. the difference being the value ascribed to below market leases?

 

[Mephistopheles]

My portfolio is down this year, but that doesn't count since it's voluntary

[merkhet]

My portfolio is down this year, but that doesn't count since it's voluntary

 

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