SHLDQ - Sears Holdings Corp

[Luke 532]

Buffett bought National Indemnity through BRK in 1967. That was three years after taking over. Even if it he did not make it obvious to shareholders what he was doing I am guessing it was more clear than the current situation with SHLD.

 

He also didn't have an epic market/economy collapse to deal with, that has to be factored in... and it took place roughly 4 years after getting involved with SHLD.

[compoundinglife]

Anyone also know how old WEB was when he first invested in Berkshire Hathaway? How old was he when he shut down his fund? And how old was he when he assumed CEO?

 

 

Not that I want to be picky on ESL anymore than I have. But the guy is like over 50 years old. I think Berkowitz is the same age, both born in 61/62. It seems they are going slowly with this whole thing, I just wonder how it compares with Buffett who has been CEO for well over 40 years. Can ESL be the next WEB at the age he is now running Sears himself, assuming he gives up the hedge fund?

 

I believe he was 32 when he started buying the stock and around 39 (1962 and 1969 respectively) when closed up shop with the partners.

[compoundinglife]

Buffett bought National Indemnity through BRK in 1967. That was three years after taking over. Even if it he did not make it obvious to shareholders what he was doing I am guessing it was more clear than the current situation with SHLD.

 

He also didn't have an epic market/economy collapse to deal with, that has to be factored in... and it took place roughly 4 years after getting involved with SHLD.

 

Yes this is true. Regardless of the circumstances though my point is that from an outside observer view it was probably more obvious that WEB was creating an investment vehicle and quickly diversifying away from textiles, which based on our current data is not obviously the case with ESL. We can speculate that based on various things such as liquidating his equity positions. But there are no actions taking place that confirm it is happening or that it is his intention. 

[LC]

But if he just started talking straight with everyone and went out of his way to help us understand better his thought process, we wouldn't be arguing over the bankruptcy remote and bondholder issues. 

 

If he was straight with us (i.e. spelled-it-out) using words then the stock price wouldn't be as attractive as it is today.

 

WEB has said that he would prefer if the price of his vehicle (BRK) would approximate its intrinsic value. I'm not sure why ESL would want his stock to be grossly undervalued, unless he wants to actively buy from current shareholders at a song.

 

Which is exactly what Michael Dell was/is doing, but he received much worse reception for the same practice.

[treasurehunt]

Thanks to everyone for a very interesting discussion of Sears.

 

I have questions for Luke regarding a couple of claims he has made in his posts.

 

1) Lampert's 29% annuallized returns: Do you have any solid substantiation for this? I see articles online, dating from 2006 to 2013, claiming this 29% number. I suspect that 29% was correct at one time -- maybe in 2006 -- and has been used blindly since.

 

2) Shopyourway being the #3 online retailer: Looking at traffic ranks on alexa.com, sears.com and shopyourway.com are nowhere in the picture. The highest ranking according to sales that I could find was this article from Internet Retailer, which suggests that Sears was the #8 online retailer earlier this year: http://www.internetretailer.com/2013/03/21/sears-sparks-web-sales-growth-personalization. Of course the same site says that walmart.com was #4: http://www.internetretailer.com/2013/08/15/wal-marts-online-sales-increase-30-first-half-2013. Which source claims that Shopyourway is the #3 online retailer?

 

[Luke 532]

But if he just started talking straight with everyone and went out of his way to help us understand better his thought process, we wouldn't be arguing over the bankruptcy remote and bondholder issues. 

 

If he was straight with us (i.e. spelled-it-out) using words then the stock price wouldn't be as attractive as it is today.

 

WEB has said that he would prefer if the price of his vehicle (BRK) would approximate its intrinsic value. I'm not sure why ESL would want his stock to be grossly undervalued, unless he wants to actively buy from current shareholders at a song.

 

WEB says that now but not back when he was accumulating.  He was doing some of the very same things back then that Lampert is doing today.

 

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/shld-sears/msg94580/#msg94580

"Not so different from Warren Buffett when he liquidated his partnership over a few years until the end was his partners having a choice, theres some Berkshire shares you own... you could sell em... but I think I want to stick around the Mill's for a few years, up to you!'

Buffett owned about 33% of Berkshire Hathaway before he was content with his control and decided the rest could be his partners but it took a while to get all the partners cashed out and given the option to have shares or sell them back to Buffett"

 

[Luke 532]

Yes this is true. Regardless of the circumstances though my point is that from an outside observer view it was probably more obvious that WEB was creating an investment vehicle and quickly diversifying away from textiles, which based on our current data is not obviously the case with ESL. We can speculate that based on various things such as liquidating his equity positions. But there are no actions taking place that confirm it is happening or that it is his intention.

 

I guess we can call it speculation but at some point you have to connect the dots. When we do that I think we do have evidence that he is creating an investment vehicle and diversifying away from Sears retail as it exists today.  He is spending more on initiatives like ShopYourWay.  He has set up Seritage and UbiquityCE.  He is spending almost nothing on CapEx in crappy stores.  He is also becoming largely concentrated.

 

It's speculating to think that Barry Bonds took steroids but looking at pictures of him in his Pittsburgh Pirate days compared to his SF Giants days, coupled with other "coincidences," it becomes pretty clear that connecting those dots leads to a likely conclusion.

[compoundinglife]

Yes this is true. Regardless of the circumstances though my point is that from an outside observer view it was probably more obvious that WEB was creating an investment vehicle and quickly diversifying away from textiles, which based on our current data is not obviously the case with ESL. We can speculate that based on various things such as liquidating his equity positions. But there are no actions taking place that confirm it is happening or that it is his intention.

 

I guess we can call it speculation but at some point you have to connect the dots. When we do that I think we do have evidence that he is creating an investment vehicle and diversifying away from Sears retail as it exists today.  He is spending more on initiatives like ShopYourWay.  He has set up Seritage and UbiquityCE.  He is spending almost nothing on CapEx in crappy stores.  He is also becoming largely concentrated.

 

It's speculating to think that Barry Bonds took steroids but looking at pictures of him in his Pittsburgh Pirate days compared to his SF Giants days, coupled with other "coincidences," it becomes pretty clear that connecting those dots leads to a likely conclusion.

 

I don't disagree that there are dots to be connected, that is part of investing. Its clear that ESL is trying to get some things done at SHLD. But trying to reconcile his action or lack there of to a young WEB can cause us to lose sight of the fact that we own a company that has a long long way to go before its out of the woods and there is some chance it may not happen. As Charlie says "always invert". Rather than talking about how similar the situation between SHLD and early BRK are, I am merely trying to illustrate the ways in which they are very different.

[T-bone1]

Have any of you looked at the shares held by insiders (Eddie, Tisch, employees) plus long term SHLD investors (Baker Street, Fairholme, etc.)?  It looks to me like they hold ~91 million shares in aggregate.

 

ETFs and Index funds (that must own SHLD) own another ~6.2 million.

 

Other institutional holders own ~8.6 million more shares.

 

I haven't seen anything like this since FFH in 2006.  There are 14 million shares out and roughly 100% of the shares already accounted for.  Depending on how you want to calculate what the float is, the math could get difficult for the shorts (short interest is up 5.9 million shares in last 3 months).

 

Food for thought.

[Luke 532]

Yes this is true. Regardless of the circumstances though my point is that from an outside observer view it was probably more obvious that WEB was creating an investment vehicle and quickly diversifying away from textiles, which based on our current data is not obviously the case with ESL. We can speculate that based on various things such as liquidating his equity positions. But there are no actions taking place that confirm it is happening or that it is his intention.

 

I guess we can call it speculation but at some point you have to connect the dots. When we do that I think we do have evidence that he is creating an investment vehicle and diversifying away from Sears retail as it exists today.  He is spending more on initiatives like ShopYourWay.  He has set up Seritage and UbiquityCE.  He is spending almost nothing on CapEx in crappy stores.  He is also becoming largely concentrated.

 

It's speculating to think that Barry Bonds took steroids but looking at pictures of him in his Pittsburgh Pirate days compared to his SF Giants days, coupled with other "coincidences," it becomes pretty clear that connecting those dots leads to a likely conclusion.

 

I don't disagree that there are dots to be connected, that is part of investing. Its clear that ESL is trying to get some things done at SHLD. But trying to reconcile his action or lack there of to a young WEB can cause us to lose sight of the fact that we own a company that has a long long way to go before its out of the woods and there is some chance it may not happen. As Charlie says "always invert". Rather than talking about how similar the situation between SHLD and early BRK are, I am merely trying to illustrate the ways in which they are very different.

 

We're in agreement.  I actually think focusing more on the negatives/risks is a better use of time than focusing on positives.

[Luke 532]

Have any of you looked at the shares held by insiders (Eddie, Tisch, employees) plus long term SHLD investors (Baker Street, Fairholme, etc.)?  It looks to me like they hold ~91 million shares in aggregate.

 

ETFs and Index funds (that must own SHLD) own another ~6.2 million.

 

Other institutional holders own ~8.6 million more shares.

 

I haven't seen anything like this since FFH in 2006.  There are 14 million shares out and roughly 100% of the shares already accounted for.  Depending on how you want to calculate what the float is, the math could get difficult for the shorts (short interest is up 5.9 million shares in last 3 months).

 

Food for thought.

 

That has been discussed quite a bit.  I recommend reading through this message board from beginning to end.  I've done that at least 3 times in it's entirety as part of my research before I bought a single share. I only hold about 5 companies at any given time so I tend to do quite a bit of studying prior to making an investment.  Anyway, check out the discussions we've had on the potential for a short squeeze.

[T-bone1]

Have any of you looked at the shares held by insiders (Eddie, Tisch, employees) plus long term SHLD investors (Baker Street, Fairholme, etc.)?  It looks to me like they hold ~91 million shares in aggregate.

 

ETFs and Index funds (that must own SHLD) own another ~6.2 million.

 

Other institutional holders own ~8.6 million more shares.

 

I haven't seen anything like this since FFH in 2006.  There are 14 million shares out and roughly 100% of the shares already accounted for.  Depending on how you want to calculate what the float is, the math could get difficult for the shorts (short interest is up 5.9 million shares in last 3 months).

 

Food for thought.

 

That has been discussed quite a bit.  I recommend reading through this message board from beginning to end.  I've done that at least 3 times in it's entirety as part of my research before I bought a single share. I only hold about 5 companies at any given time so I tend to do quite a bit of studying prior to making an investment.  Anyway, check out the discussions we've had on the potential for a short squeeze.

 

Thanks Luke,

 

I've done my best to keep up with most of the discussion, but probably missed more than a few messages.  I know it has always been a small float, but I went through every holder with more than 5,000 shares today (making sure not to double count any sub-advisors or stale reports) and incorporated all of the 13Fs that came out last night. 

 

I have never seen anything this close to a corner since FFH, when naked shorting was essentially legal.  I haven't seen anyone else go through all of the new filings since last night, but if someone else already has I apologize for beating a dead horse.

 

-t-bone 1

[BTShine]

WSJ: Shipments of the so-called Big Six appliance categories — washers, dryers, dishwashers, refrigerators, freezers and ranges and ovens — surged 10.8% in the latest month to 2.76 million units. These categories were up 8.1% in the first seven months.

 

http://blogs.wsj.com/economics/2013/08/15/shipments-of-home-appliances-rise/

 

My Take: Appliance sales have to follow the boom in new and existing home sales.  Appliance sales have been depressed along with the housing market for some time now.  Looking at the data, I'm starting to get the same feeling I had when owning AutoNation in late 2009 and 2010.  Auto sales returned to normal levels and AN performed accordingly (both the company and stock).

[enoch01]

Have any of you looked at the shares held by insiders (Eddie, Tisch, employees) plus long term SHLD investors (Baker Street, Fairholme, etc.)?  It looks to me like they hold ~91 million shares in aggregate.

 

ETFs and Index funds (that must own SHLD) own another ~6.2 million.

 

Other institutional holders own ~8.6 million more shares.

 

I haven't seen anything like this since FFH in 2006.  There are 14 million shares out and roughly 100% of the shares already accounted for.  Depending on how you want to calculate what the float is, the math could get difficult for the shorts (short interest is up 5.9 million shares in last 3 months).

 

Food for thought.

 

Thanks for the update.  Someone is going to end up very wrong on this.  I don't see much middle ground.  I have been buying calls just in case the price rises uncontrollably.

[BTShine]

Have any of you looked at the shares held by insiders (Eddie, Tisch, employees) plus long term SHLD investors (Baker Street, Fairholme, etc.)?  It looks to me like they hold ~91 million shares in aggregate.

 

ETFs and Index funds (that must own SHLD) own another ~6.2 million.

 

Other institutional holders own ~8.6 million more shares.

 

I haven't seen anything like this since FFH in 2006.  There are 14 million shares out and roughly 100% of the shares already accounted for.  Depending on how you want to calculate what the float is, the math could get difficult for the shorts (short interest is up 5.9 million shares in last 3 months).

 

Food for thought.

 

That has been discussed quite a bit.  I recommend reading through this message board from beginning to end.  I've done that at least 3 times in it's entirety as part of my research before I bought a single share. I only hold about 5 companies at any given time so I tend to do quite a bit of studying prior to making an investment.  Anyway, check out the discussions we've had on the potential for a short squeeze.

 

Thanks Luke,

 

I've done my best to keep up with most of the discussion, but probably missed more than a few messages.  I know it has always been a small float, but I went through every holder with more than 5,000 shares today (making sure not to double count any sub-advisors or stale reports) and incorporated all of the 13Fs that came out last night. 

 

I have never seen anything this close to a corner since FFH, when naked shorting was essentially legal.  I haven't seen anyone else go through all of the new filings since last night, but if someone else already has I apologize for beating a dead horse.

 

-t-bone 1

 

T-Bone 1

 

Would you be interested in posting your findings?  Agreed, there is a huge short interest! 

 

I've always believed that a huge short interest creates somewhat of a synthetic increase in the shares outstanding.  For example, SHLD has 106 million shares outstanding.  13 million of those shares are owned by people that are long the stock and lend out their shares to be re-sold by short sellers.  The new buyers of the 13 million shares also consider themselves owners (these are the people that bought the SHLD shares from the Shorts).  So, in many ways you have 119 million (106 + 13)  shares that are believed to be owned by people, not 106 million.  It's a wild, wild phenomenon. 

[ERICOPOLY]

Have any of you looked at the shares held by insiders (Eddie, Tisch, employees) plus long term SHLD investors (Baker Street, Fairholme, etc.)?  It looks to me like they hold ~91 million shares in aggregate.

 

ETFs and Index funds (that must own SHLD) own another ~6.2 million.

 

Other institutional holders own ~8.6 million more shares.

 

I haven't seen anything like this since FFH in 2006.  There are 14 million shares out and roughly 100% of the shares already accounted for.  Depending on how you want to calculate what the float is, the math could get difficult for the shorts (short interest is up 5.9 million shares in last 3 months).

 

Food for thought.

 

That has been discussed quite a bit.  I recommend reading through this message board from beginning to end.  I've done that at least 3 times in it's entirety as part of my research before I bought a single share. I only hold about 5 companies at any given time so I tend to do quite a bit of studying prior to making an investment.  Anyway, check out the discussions we've had on the potential for a short squeeze.

 

Thanks Luke,

 

I've done my best to keep up with most of the discussion, but probably missed more than a few messages.  I know it has always been a small float, but I went through every holder with more than 5,000 shares today (making sure not to double count any sub-advisors or stale reports) and incorporated all of the 13Fs that came out last night. 

 

I have never seen anything this close to a corner since FFH, when naked shorting was essentially legal.  I haven't seen anyone else go through all of the new filings since last night, but if someone else already has I apologize for beating a dead horse.

 

-t-bone 1

 

T-Bone 1

 

Would you be interested in posting your findings?  Agreed, there is a huge short interest! 

 

I've always believed that a huge short interest creates somewhat of a synthetic increase in the shares outstanding.  For example, SHLD has 106 million shares outstanding.  13 million of those shares are owned by people that are long the stock and lend out their shares to be re-sold by short sellers.  The new buyers of the 13 million shares also consider themselves owners (these are the people that bought the SHLD shares from the Shorts).  So, in many ways you have 119 million (106 + 13)  shares that are believed to be owned by people, not 106 million.  It's a wild, wild phenomenon.

 

And that 119 shares can grow to 132 million if the new owners of those 13 million shares also choose to lend the stock.

Then the 132 million can grow to 145 million if the new owners... ....  etc etc... etc...

 

Then it grows to a trillion, then a billion trillion, etc... etc...

 

All naked short selling gets you is a free short (no borrow cost). 

[T-bone1]

Have any of you looked at the shares held by insiders (Eddie, Tisch, employees) plus long term SHLD investors (Baker Street, Fairholme, etc.)?  It looks to me like they hold ~91 million shares in aggregate.

 

ETFs and Index funds (that must own SHLD) own another ~6.2 million.

 

Other institutional holders own ~8.6 million more shares.

 

I haven't seen anything like this since FFH in 2006.  There are 14 million shares out and roughly 100% of the shares already accounted for.  Depending on how you want to calculate what the float is, the math could get difficult for the shorts (short interest is up 5.9 million shares in last 3 months).

 

Food for thought.

 

That has been discussed quite a bit.  I recommend reading through this message board from beginning to end.  I've done that at least 3 times in it's entirety as part of my research before I bought a single share. I only hold about 5 companies at any given time so I tend to do quite a bit of studying prior to making an investment.  Anyway, check out the discussions we've had on the potential for a short squeeze.

 

Thanks Luke,

 

I've done my best to keep up with most of the discussion, but probably missed more than a few messages.  I know it has always been a small float, but I went through every holder with more than 5,000 shares today (making sure not to double count any sub-advisors or stale reports) and incorporated all of the 13Fs that came out last night. 

 

I have never seen anything this close to a corner since FFH, when naked shorting was essentially legal.  I haven't seen anyone else go through all of the new filings since last night, but if someone else already has I apologize for beating a dead horse.

 

-t-bone 1

 

T-Bone 1

 

Would you be interested in posting your findings?  Agreed, there is a huge short interest! 

 

I've always believed that a huge short interest creates somewhat of a synthetic increase in the shares outstanding.  For example, SHLD has 106 million shares outstanding.  13 million of those shares are owned by people that are long the stock and lend out their shares to be re-sold by short sellers.  The new buyers of the 13 million shares also consider themselves owners (these are the people that bought the SHLD shares from the Shorts).  So, in many ways you have 119 million (106 + 13)  shares that are believed to be owned by people, not 106 million.  It's a wild, wild phenomenon.

 

And that 119 shares can grow to 132 million if the new owners of those 13 million shares also choose to lend the stock.

Then the 132 million can grow to 145 million if the new owners... ....  etc etc... etc...

 

Then it grows to a trillion, then a billion trillion, etc... etc...

 

All naked short selling gets you is a free short (no borrow cost).

 

Of course you can't naked short anymore . . . and the cost to borrow went up to 10% today (from 3%) and none was available where I checked.  Some of the large longs must be lending out their shares for there to be 14MM shares short . . . if they were to pull their borrow or others were to buy long term holdings in the stock . . .

 

I assume Berkowitz is capped at 19.9% by mutual fund rules, does anyone know if this is correct?

 

If the company doesn't go bankrupt next week, I don't know why you would want to hold this increasingly expensive short at close to the 52 week low.  I own stock and calls.

[ERICOPOLY]

If the company doesn't go bankrupt next week, I don't know why you would want to hold this increasingly expensive short at close to the 52 week low.  I own stock and calls.

 

That's a good way of phrasing the reason why I decided to make a trade of it.  The people who trade based on charts should get sucked into it and that should make the short more expensive by the day.  So then it turns and people who trade on charts+momentum will find it attractive.  But it seems like this goes on every year and it stalls out no lower than $60.  Meanwhile, so long as there is nothing immediately pressing (liquidity) to make the stock suddenly dive lower, this trading is probably relatively safe as far as trading goes.  And the tons of assets they possess make that nearly a lock.

[T-bone1]

If the company doesn't go bankrupt next week, I don't know why you would want to hold this increasingly expensive short at close to the 52 week low.  I own stock and calls.

 

That's a good way of phrasing the reason why I decided to make a trade of it.  The people who trade based on charts should get sucked into it and that should make the short more expensive by the day.  So then it turns and people who trade on charts+momentum will find it attractive.  But it seems like this goes on every year and it stalls out no lower than $60.

 

+1

[ItsAValueTrap]

All naked short selling gets you is a free short (no borrow cost). 

I suspect the brokers do it just to keep the interest on the borrow.  If their clients don't pay the borrow cost that they should be paying, they will know that something illegal is happening.  If you're going to expose yourself to legal liability, you might as well profit from it.

[muscleman]

Have any of you looked at the shares held by insiders (Eddie, Tisch, employees) plus long term SHLD investors (Baker Street, Fairholme, etc.)?  It looks to me like they hold ~91 million shares in aggregate.

 

ETFs and Index funds (that must own SHLD) own another ~6.2 million.

 

Other institutional holders own ~8.6 million more shares.

 

I haven't seen anything like this since FFH in 2006.  There are 14 million shares out and roughly 100% of the shares already accounted for.  Depending on how you want to calculate what the float is, the math could get difficult for the shorts (short interest is up 5.9 million shares in last 3 months).

 

Food for thought.

 

That has been discussed quite a bit.  I recommend reading through this message board from beginning to end.  I've done that at least 3 times in it's entirety as part of my research before I bought a single share. I only hold about 5 companies at any given time so I tend to do quite a bit of studying prior to making an investment.  Anyway, check out the discussions we've had on the potential for a short squeeze.

 

Thanks Luke,

 

I've done my best to keep up with most of the discussion, but probably missed more than a few messages.  I know it has always been a small float, but I went through every holder with more than 5,000 shares today (making sure not to double count any sub-advisors or stale reports) and incorporated all of the 13Fs that came out last night. 

 

I have never seen anything this close to a corner since FFH, when naked shorting was essentially legal.  I haven't seen anyone else go through all of the new filings since last night, but if someone else already has I apologize for beating a dead horse.

 

-t-bone 1

 

T-Bone 1

 

Would you be interested in posting your findings?  Agreed, there is a huge short interest! 

 

I've always believed that a huge short interest creates somewhat of a synthetic increase in the shares outstanding.  For example, SHLD has 106 million shares outstanding.  13 million of those shares are owned by people that are long the stock and lend out their shares to be re-sold by short sellers.  The new buyers of the 13 million shares also consider themselves owners (these are the people that bought the SHLD shares from the Shorts).  So, in many ways you have 119 million (106 + 13)  shares that are believed to be owned by people, not 106 million.  It's a wild, wild phenomenon.

 

And that 119 shares can grow to 132 million if the new owners of those 13 million shares also choose to lend the stock.

Then the 132 million can grow to 145 million if the new owners... ....  etc etc... etc...

 

Then it grows to a trillion, then a billion trillion, etc... etc...

 

All naked short selling gets you is a free short (no borrow cost).

 

I am a bit confused. I think people cannot lend the share out if the share they own is bought from a short seller.

Regarding naked short, I have no experience with it. So this has no borrow cost and does not have to comply with the uptick rule? That sounds awesome and convenient. Which broker can do that? Isn't it banned?

[ERICOPOLY]

I am a bit confused. I think people cannot lend the share out if the share they own is bought from a short seller.

 

I don't know who I bought my shares from.  And you, who did you buy yours from?

 

Regarding naked short, I have no experience with it. So this has no borrow cost and does not have to comply with the uptick rule? That sounds awesome and convenient. Which broker can do that? Isn't it banned?

 

It's been banned for a long time.

[constructive]

There's still 3 days grace period between when you short a stock and when your broker has to deliver the shares or call in your position. During that time it can be a legal naked short.

 

But most brokers will not allow you to short unless they are confident they can locate a borrow.

[constructive]

http://www.dtcc.com/news/newsletters/dtcc/2005/mar/naked_short_selling.php

[mcliu]

Would be interested to see evidence for these claims as well.

 

 

Thanks to everyone for a very interesting discussion of Sears.

 

I have questions for Luke regarding a couple of claims he has made in his posts.

 

1) Lampert's 29% annuallized returns: Do you have any solid substantiation for this? I see articles online, dating from 2006 to 2013, claiming this 29% number. I suspect that 29% was correct at one time -- maybe in 2006 -- and has been used blindly since.

 

2) Shopyourway being the #3 online retailer: Looking at traffic ranks on alexa.com, sears.com and shopyourway.com are nowhere in the picture. The highest ranking according to sales that I could find was this article from Internet Retailer, which suggests that Sears was the #8 online retailer earlier this year: http://www.internetretailer.com/2013/03/21/sears-sparks-web-sales-growth-personalization. Of course the same site says that walmart.com was #4: http://www.internetretailer.com/2013/08/15/wal-marts-online-sales-increase-30-first-half-2013. Which source claims that Shopyourway is the #3 online retailer?