SHLDQ - Sears Holdings Corp

[Luke 532]

When I propose one popular speculation -- that if improved operations don't get the stock moving soon, he will begin selling off more real estate and maybe even Sears house brands like Craftsman -- he laughs, simply saying, "No."

http://money.cnn.com/2006/02/03/news/companies/investorsguide_lampert/index.htm

Yet he has sold lots of real estate at an accelerating pace, and has segregated KCD assets, and licensed Craftsman to Ace Hardware. Watch what he does, not what he says.

You're assuming he is selling the real estate because of the low stock price.  My point in that post was that Eddie does not care about catering to the whims of the market, he cares about creating long-term value for the stockholders.  Selling real estate can maximize value, but don't think for a second it's due to him wanting to increase the stock price in the short-term.

[Guest wellmont]

none that I know of . . . he owns less than 20% of SHLD and owns ~27% of JOE if memory serves correctly.  I thought there was a regulation on putting more than 25% of his fund into one stock, but I believe he exceeded that with AIG.

 

he likes aig way better than shld apparently. my guess is he still thinks it's cheap and wants to own more of it.

[merkhet]

none that I know of . . . he owns less than 20% of SHLD and owns ~27% of JOE if memory serves correctly.  I thought there was a regulation on putting more than 25% of his fund into one stock, but I believe he exceeded that with AIG.

 

he likes aig way better than shld apparently. my guess is he still thinks it's cheap and wants to own more of it.

 

AIG market cap: $68B

SHLD market cap: $4B

 

Not necessarily.

[Guest wellmont]

if I like a stock better I make it a bigger position % wise in my portfolio regardless of market cap. That seems logical to me. Other investors may do things differently. But in the end all this discussion of who is going to own it who is going to buy more of it, is irrelevant. what is going on in the business? from what i can tell it's doing really poorly and the stock reflects that on a daily basis.

[Luke 532]

if I like a stock better I make it a bigger position % wise in my portfolio regardless of market cap. That seems logical to me. Other investors may do things differently. But in the end all this discussion of who is going to own it who is going to buy more of it, is irrelevant. what is going on in the business? from what i can tell it's doing really poorly and the stock reflects that on a daily basis.

 

You are listening to Mr. Market as if EMH was a valid theory.  Has the real value of SHLD (not the stock price) really decreased 33% since the last earnings report?  When the stock gyrates from $40 to $75 is the real value of SHLD nearly doubling?  Gyrations like that tell me one thing: the market DOES NOT know how to value SHLD.  Markets not being able to value it, and the volatility that ensues, is to the benefit of the long-term holder.

[T-bone1]

Isn't SHLD the only existing holding Berkowitz added to meaningfully in the last quarter?

[plato1976]

I think I am keeping a small position just in anticipation of a short squeeze

 

fundamentally I am not comfortable to add and build a very large position here:

the real estate thesis is really not easy to understand. First, hard to estimate how much is left after the closing cost, second, the most value is very possibly in stores they cannot close (those very profitable stores)

 

but this stock has lots of firm holders and some are really big - a short squeeze can happen any time soon with a positive news

 

if I like a stock better I make it a bigger position % wise in my portfolio regardless of market cap. That seems logical to me. Other investors may do things differently. But in the end all this discussion of who is going to own it who is going to buy more of it, is irrelevant. what is going on in the business? from what i can tell it's doing really poorly and the stock reflects that on a daily basis.

[constructive]

You're assuming he is selling the real estate because of the low stock price.  My point in that post was that Eddie does not care about catering to the whims of the market, he cares about creating long-term value for the stockholders.  Selling real estate can maximize value, but don't think for a second it's due to him wanting to increase the stock price in the short-term.

 

No, I'm not assuming that. I assume he is selling stores because of a combination of factors: poor operational performance, cash constraints, and maximizing shareholder value.

 

Whatever his attitude, motivations, analysis, etc., I think it's more useful to look at the measurable performance of the company.

 

The stores are sold - why does it matter why?

[tombgrt]

He added about 1.3 million shares in Q1 right? The same in Q2? That is say $75 million with an average of $50/share.

 

Market value volume for 1 quarter is about $2-2.5 billion.

 

He could probably buy more. But could he buy for say $250 million without influencing the share price too much? I don't think it's relevant at all, just interesting.

[Luke 532]

Isn't SHLD the only existing holding Berkowitz added to meaningfully in the last quarter?

 

Of his top 5 holdings SHLD is the only one in which he added a meaningful amount in Q2... by a factor of 12 if you compare percentages (4.53/0.36=12+)

 

AIG +0.29%

BAC +0.36%

SHLD +4.53%

JOE -0.07%

LUK -0.56%

http://www.nasdaq.com/article/bruce-berkowitzs-top-second-quarter-holdings-cm268020

[tombgrt]

Isn't SHLD the only existing holding Berkowitz added to meaningfully in the last quarter?

 

Of his top 5 holdings SHLD is the only one in which he added a meaningful amount in Q2... by a factor of 12 if you compare percentages (4.53/0.36=12+)

 

AIG +0.29%

BAC +0.36%

SHLD +4.53%

JOE -0.07%

LUK -0.56%

http://www.nasdaq.com/article/bruce-berkowitzs-top-second-quarter-holdings-cm268020

 

Oh so a lot less than 1.3 million shares he added in Q1. Nevermind..

[Luke 532]

You're assuming he is selling the real estate because of the low stock price.  My point in that post was that Eddie does not care about catering to the whims of the market, he cares about creating long-term value for the stockholders.  Selling real estate can maximize value, but don't think for a second it's due to him wanting to increase the stock price in the short-term.

 

No, I'm not assuming that. I assume he is selling stores because of a combination of factors: poor operational performance, cash constraints, and maximizing shareholder value.

 

Whatever his attitude, motivations, analysis, etc., I think it's more useful to look at the measurable performance of the company.

 

The stores are sold - why does it matter why?

 

But you said "look at what he does and not what he says" to imply that his statement of "No" was misleading when asked if he would sell stores due to a falling share price.  That's the only point I was trying to make with my original post... that Lampert doesn't care about short-term share price fluctuations and, as value investors, neither should we.

 

I agree that it's more useful to look at the measurable performance of the company... but that wasn't the topic I was discussing in my original post.

[Luke 532]

Isn't SHLD the only existing holding Berkowitz added to meaningfully in the last quarter?

 

Of his top 5 holdings SHLD is the only one in which he added a meaningful amount in Q2... by a factor of 12 if you compare percentages (4.53/0.36=12+)

 

AIG +0.29%

BAC +0.36%

SHLD +4.53%

JOE -0.07%

LUK -0.56%

http://www.nasdaq.com/article/bruce-berkowitzs-top-second-quarter-holdings-cm268020

 

Oh so a lot less than 1.3 million shares he added in Q1. Nevermind..

 

Q2 (numbers reported in August 2013) he added 800,000+ shares.  Q1 (reported in May 2013) he added 1,300,000+ shares...

 

Feb 2010:      14,951,639

May 2010:      14,714,071

Aug 2010:      14,037,171

Nov 2010:      14,661,671

Feb 2011:      14,917,873

May 2011:      16,313,973

Aug 2011:      16,380,680

Nov 2011:      16,270,692

Feb 2012:      16,108,492

May 2012:        16,813,480

Aug 2012:        16,829,880

Nov 2012:        16,934,080

Feb 2013:        18,146,573

May 2013:        19,508,773

 

[constructive]

But you said "look at what he does and not what he says" to imply that his statement of "No" was misleading when asked if he would sell stores if the share price drops.

 

But the share price dropped and he sold stores! Those are measurable facts, his reasons for selling the stores aren't measurable.

 

I'm sure there are other quotes from 2005-2007 which also illustrate that some of his plans have not gone as intended.

[Luke 532]

But you said "look at what he does and not what he says" to imply that his statement of "No" was misleading when asked if he would sell stores if the share price drops.

 

But the share price dropped and he sold stores! Those are measurable facts, his reasons for selling the stores aren't measurable. 

 

I'm sure there are other quotes from 2005-2007 which also illustrate that some of his plans have not gone as intended.

 

This is a silly conversation because you're just missing the point of what I was saying in my original post.  Let's move on to more important topics, shall we?

 

[king888]

What is the intrinsic value range of Sears ?

 

I have observed the conversation here for awhile .But I didn't see much talk in valuation.

Value Investing means you buy something cheap base on some valuation metrix , isn't it ?

 

Share price is just what the mr. market thinks so it is not relevant at all . But how someone justify that SHLD is overvalued ir undervalued at any price without his/her own calculation ? If the SYW plan success , how much cash flow it will bring to the company ?

 

[Luke 532]

What is the intrinsic value range of Sears ?

 

I have observed the conversation here for awhile .But I didn't see much talk in valuation.

Value Investing means you buy something cheap base on some valuation metrix , isn't it ?

 

You're going to have a difficult (more like impossible) time of coming up with a specific valuation so your approach of looking for a range is correct.  I believe the bottom-end of the range is well above the current market cap based on the value of the assets under different scenarios minus the liabilities.  I'm not concerned about the top-end of the value range as that could rise meaningfully if Lampert is successful.

 

By the way, if you read all the pages on the SHLD message board you'll see a lot of talk about trying to value the company.  After all, that's what we're here to do! :-)

 

Share price is just what the mr. market thinks so it is not relevant at all . But how someone justify that SHLD is overvalued ir undervalued at any price without his/her own calculation ? If the SYW plan success , how much cash flow it will bring to the company ?

 

If Lampert gets the retail operations clicking and consistently profitable, then the company as a whole will be in very, very, very good shape.  As far as SYW specifically?  I think it's too early to tell how much cash flow it will generate.

[constructive]

This is a silly conversation because you're just missing the point of what I was saying in my original post.  Let's move on to more important topics, shall we?

 

No, I actually agree with your original point. Lampert is a billionaire, Berkowitz has billions under management, and they have a lot of financial flexibility. I was just making a different point.

 

Cheers

[merkhet]

if I like a stock better I make it a bigger position % wise in my portfolio regardless of market cap. That seems logical to me. Other investors may do things differently. But in the end all this discussion of who is going to own it who is going to buy more of it, is irrelevant. what is going on in the business? from what i can tell it's doing really poorly and the stock reflects that on a daily basis.

 

If Fairholme has AUM of $12B and 50% of it is in AIG, then by what you said earlier, they would have to put > $6 billion to show that Berkowitz "likes SHLD more than AIG," which is impossible to do in a $4 billion company. The math just doesn't work out.

 

Therefore, because of various restrictions, like the investable market capitalization of each company, it is impossible to tell whether Berkowitz likes AIG better than SHLD or vice versa based purely on how much of his fund is in each name.

[Luke 532]

if I like a stock better I make it a bigger position % wise in my portfolio regardless of market cap. That seems logical to me. Other investors may do things differently. But in the end all this discussion of who is going to own it who is going to buy more of it, is irrelevant. what is going on in the business? from what i can tell it's doing really poorly and the stock reflects that on a daily basis.

 

If Fairholme has AUM of $12B and 50% of it is in AIG, then by what you said earlier, they would have to put > $6 billion to show that Berkowitz "likes SHLD more than AIG," which is impossible to do in a $4 billion company. The math just doesn't work out.

 

Therefore, because of various restrictions, like the investable market capitalization of each company, it is impossible to tell whether Berkowitz likes AIG better than SHLD or vice versa based purely on how much of his fund is in each name.

 

Agree with merkhet.  Suffice it to say, Berkowitz really likes AIG, BAC, and SHLD.  He's been adding more, percentage wise, to SHLD recently but that could be a factor of mutual fund restrictions ("I'd own more BAC if I could" he mentioned once or twice on Consuelo Mack).  Bottom-line: he likes all 3 companies very much. 

[Guest wellmont]

if I like a stock better I make it a bigger position % wise in my portfolio regardless of market cap. That seems logical to me. Other investors may do things differently. But in the end all this discussion of who is going to own it who is going to buy more of it, is irrelevant. what is going on in the business? from what i can tell it's doing really poorly and the stock reflects that on a daily basis.

 

If Fairholme has AUM of $12B and 50% of it is in AIG, then by what you said earlier, they would have to put > $6 billion to show that Berkowitz "likes SHLD more than AIG," which is impossible to do in a $4 billion company. The math just doesn't work out.

 

Therefore, because of various restrictions, like the investable market capitalization of each company, it is impossible to tell whether Berkowitz likes AIG better than SHLD or vice versa based purely on how much of his fund is in each name.

 

not following. you're saying if he didn't have so much money in aig he could buy more shld? that's self evident. But he has voted with his AUM. The fact is he has made his big bet on AIG and a smaller bet on shld. That's been smart, because the business of shld (and stock) continues to circle the drain, while aig is performing very well.

[Luke 532]

Anybody that has researched or followed SHLD knows that the public perception is that Lampert is "crazy" or an "idiot."  If that's true, then the media should also be calling Berkowitz by the same names.

 

Both have large stakes in SHLD.

 

Lampert has sold off (in-part or in-whole) every other investment in ESL except SHLD.

 

Berkowitz sold off other positions (when his fund went from $20B to $7B) in much larger proportion than he sold SHLD (<2% decrease in share count on SHLD in late 2011 when he was clearly a complete idiot and had forgotten all sense... some sarcasm there).

 

Berkowitz has added shares of SHLD consistently.  Last 5 quarters; 16.8M, 16.9M, 18.1M, 19.5M, 20.4M (note the % increases the past three quarters on a quarter-to-quarter basis have been roughly 7.1%, 7.7%, 4.6%).  Anybody think he's going to stop buying when the new money rolls into his fund?

 

Yes, Berkowitz has other investments so if SHLD blows up he's not dead, but one would have to conclude that he's "crazy" and an "idiot" for adding in such large quantities.

 

It's a very tough argument to make that both Lampert and Berkowitz have gone crazy and have decided to place a very sizable chunk of their funds (SHLD is #1 for Lampert, #3 for Berkowitz), and adding to them consistently (either through buying SHLD shares and/or reducing other positions), in something that doesn't have a legitimate margin of safety.

[ASTA]

wellmont

I disagree the more a fund manger own in % terms of the company normally is a better indicator then a % part of his AUM just my small opinion. pissed about my -6% in one trading day ;D

 

[stahleyp]

if I like a stock better I make it a bigger position % wise in my portfolio regardless of market cap. That seems logical to me. Other investors may do things differently. But in the end all this discussion of who is going to own it who is going to buy more of it, is irrelevant. what is going on in the business? from what i can tell it's doing really poorly and the stock reflects that on a daily basis.

 

If Fairholme has AUM of $12B and 50% of it is in AIG, then by what you said earlier, they would have to put > $6 billion to show that Berkowitz "likes SHLD more than AIG," which is impossible to do in a $4 billion company. The math just doesn't work out.

 

Therefore, because of various restrictions, like the investable market capitalization of each company, it is impossible to tell whether Berkowitz likes AIG better than SHLD or vice versa based purely on how much of his fund is in each name.

 

not following. you're saying if he didn't have so much money in aig he could buy more shld? that's self evident. But he has voted with his AUM. The fact is he has made his big bet on AIG and a smaller bet on shld. That's been smart, because the business of shld (and stock) continues to circle the drain, while aig is performing very well.

peter, weren't you also adamant that rimm was a terrible investment around $7 last year? ;)

[Guest wellmont]

weren't you also adamant that rimm was a terrible investment around $7 last year? ;)

 

you're timing is a bit off. I was adamant that is was a terrible investment in the $40s when pw was buying stock and you were telling people to buy LEAPS. :)