SHLDQ - Sears Holdings Corp

[tombgrt]

Did anyone take a dip in the '15 calls? I believe 60-strike price contracts were trading in the 4.50 range about a month ago. They are a tidy bit higher now :D

 

Yes, I bought a shitload of the $45 strike price January 15 call options in our U.S. fund...4% of the fund...I paid $6.  That's why I haven't talked about Sears on the board for the last two months.  Cheers!

 

Knew something was up. Your last post here was obvious imo. Gratz. ;)

 

Sorry, that should have said $8.  We had an order in to buy more when SHLD dropped to $39 a couple of weeks ago, but it didn't get filled.  Cheers!

 

Then you are up nicely. :) Any target you are aiming for Sanjeev?

 

I think it's odd how a lot of us had the same idea about getting into this leveraged.

 

 

I'm up almost 3-fold on a position bought an hour ago. I'm glad I'm not Eric buying things en masse, I couldn't stand the stress. Now it's just tail I lose all my SHLD profit from the last week, head I win big.

 

[merkhet]

Oddly enough, I decided against going into this leveraged -- I just made it a larger percentage of my portfolio from the get go. Picked up shares a little below $40.

[CorpRaider]

Man that one guy who came in here with the negative haymakers regarding the lack of analysis almost perfectly called this bottom, no?

[mevsemt]

Here's the question: is this just a short squeeze unwinding under its own momentum, or is some announcement coming?  I mean 15% in a day is crazy on no news!! 

[locatevalue]

Oddly enough, I decided against going into this leveraged -- I just made it a larger percentage of my portfolio from the get go. Picked up shares a little below $40.

 

Same with me i took 10% position and good to see above 25% profit so far with this run within such a short time. I am a very week predictor of price and never played with options so far and dont want this to be my first one with options :) with predictions all over the place with such wide range of valutaions. I am really enjoying this run though!

[Mephistopheles]

For those of you who chose to buy options, I'm curious to know what your thinking was? I looked at the LEAPS when it was in the mid 40s and saw that the cost of leverage was pretty damn high, and so I decided instead to make the equity a large position of my portfolio, like merkhet.

[Luke 532]

For those of you who chose to buy options, I'm curious to know what your thinking was? I looked at the LEAPS when it was in the mid 40s and saw that the cost of leverage was pretty damn high, and so I decided instead to make the equity a large position of my portfolio, like merkhet.

 

My investment position is in the common stock and that is a different thesis than the squeeze thesis (although there are components of both that overlap).  But I have the deep OTM calls as a speculative position based on the very real possibility (not probable, but very possible) of a VW-type squeeze.  They were cheap enough for me and I prepared to lose 100% of the trade (and still do eventhough they've quadrupled) but the thesis was based on a VW-type squeeze happening.  I don't plan on selling those calls and will likely wait up to 17 months or so to see if that type of squeeze occurs.  If it does, that would be awesome. If it doesn't, I've lost 1% of my portfolio.  It will sound crazy to most, but I don't want to sell the position and take the 4% gain on my entire portfolio, and then try to time it and get in again.  I'm willing to risk the current gain to potentially double (or more if we get a real VW squeeze) my entire portfolio. 

[Parsad]

Here's the question: is this just a short squeeze unwinding under its own momentum, or is some announcement coming?  I mean 15% in a day is crazy on no news!!

 

I think it's a squeeze...remember this sucker jumped from $28 to $80 in a couple of months a couple of years ago.  And I thought the short position was even tighter this time around.  I would not be surprised to see it hit $70-75 again, and if you get some good news...watch out!  I'm not selling this one like the Overstock options...it's going to be my year-maker!  ;D  Cheers!

[ERICOPOLY]

I can't bear to watch it.

[krazeenyc]

I can't bear to watch it.

 

Sorry to hear it. I feel bad for you on this one. It seems that Sears is your anti-MBIA.

[mevsemt]

Here's the question: is this just a short squeeze unwinding under its own momentum, or is some announcement coming?  I mean 15% in a day is crazy on no news!!

 

I think it's a squeeze...remember this sucker jumped from $28 to $80 in a couple of months a couple of years ago.  And I thought the short position was even tighter this time around.  I would not be surprised to see it hit $70-75 again, and if you get some good news...watch out!  I'm not selling this one like the Overstock options...it's going to be my year-maker!  ;D  Cheers!

 

Remember though, part of the reason behind the 28-to-80 jump was the real estate sales and the announcement of the SHOS spin.  Granted, the short squeeze element was also a huge factor.  See this post from way back when: http://mevsemt.blogspot.com/2012/02/cause-loser-now-will-be-later-to-win.html

[Parsad]

I can't bear to watch it.

 

Sorry to hear it. I feel bad for you on this one. It seems that Sears is your anti-MBIA.

 

Only if it continues to go up.  It could very well drop back down below $40 if they keep losing money.  So we'll see...maybe Eric will be right and we should have piled out with him.  Cheers!

[krazeenyc]

I can't bear to watch it.

 

Sorry to hear it. I feel bad for you on this one. It seems that Sears is your anti-MBIA.

 

Only if it continues to go up.  It could very well drop back down below $40 if they keep losing money.  So we'll see...maybe Eric will be right and we should have piled out with him.  Cheers!

 

i was just speaking to the timing, I remember him loading up his wife's ira with mbia just hours b4 it shot up.

[enoch01]

For those of you who chose to buy options, I'm curious to know what your thinking was? I looked at the LEAPS when it was in the mid 40s and saw that the cost of leverage was pretty damn high, and so I decided instead to make the equity a large position of my portfolio, like merkhet.

 

The cost came down quite a bit after the earnings release.  I thought they would end up being valuable to people trying to cover.  As has been discussed, there are potentially lots of people trying to cover.

 

They can't all be like Fairfax back in the day.

[Mephistopheles]

For those of you who chose to buy options, I'm curious to know what your thinking was? I looked at the LEAPS when it was in the mid 40s and saw that the cost of leverage was pretty damn high, and so I decided instead to make the equity a large position of my portfolio, like merkhet.

 

The cost came down quite a bit after the earnings release.  I thought they would end up being valuable to people trying to cover.  As has been discussed, there are potentially lots of people trying to cover.

 

They can't all be like Fairfax back in the day.

 

Ah ok, I should have rechecked after the release. By that time I already had my full position and didn't even think of the options

[willie2013]

Bought common $39 to $44 sold all in the past three days $47 to $55 and was 40% of portfolio.  Bought QID more ALTSUF and more BLDR today.  Picked up this SHLD idea here, thanks to the contributors, and do recall the silence by Parsad on the subject as being bullish.  Trying to get more comfortable with BYD. Thanks again all! Big leaps like this in stocks most always lead to higher prices though, but timing a short squeeze, ownership event, spinoff,  etc is difficult.  Was there any news or speculation by writers/analysts at all today on SHLD?

 

[hyten1]

man damn

 

i have a small position, decided to go conservative bought some common around $40 and sold bunch for puts around there too

 

should of spend less money and bought the calls :(

 

 

hy

[Parsad]

Bought common $39 to $44 sold all in the past three days $47 to $55 and was 40% of portfolio.  Bought QID more ALTSUF and more BLDR today.  Picked up this SHLD idea here, thanks to the contributors, and do recall the silence by Parsad on the subject as being bullish.  Trying to get more comfortable with BYD. Thanks again all! Big leaps like this in stocks most always lead to higher prices though, but timing a short squeeze, ownership event, spinoff,  etc is difficult.  Was there any news or speculation by writers/analysts at all today on SHLD?

 

Nice!  40% of the portfolio...who do you think you are Ericopoly!  ;D

 

I think the Neiman Marcus sale changed some of the views on retailers, which was very negative for a while.  A recovering U.S. economy, retail acquisitions, better commercial real estate prices, plus hopefully some aggressive actions at SHLD, will lead to a nice short squeeze.  Cheers!

[willie2013]

Sanjeev, I'm no Eric. Read every post of his going quite a ways back.  Eric = Raw intelligence perhaps and probably loves to read with great comprehension and good mental models to make decisions. The Fairfax leaps were brilliant. I'm a coattailer!

 

Here is a post from here copied from June 6, and comments from the board led me to less diversification and more concentration on the best ideas:

 

Rather than call in to Cramer's "are you diversified" I thought I'd post my holdings: 

 

ATUSF 6.7% Idea from CB&F

BODY  1.1% Retail turnaround/Coattail Tilson

BLDR    19% A rare personal pick/sells to volume builders/gaining share/lumber prices catalyst

BYDDY 11.2% Have owned on and off for several years/probably Pabrai's secret stock

FIATY  3.6% Idea from CB&F/jockey/turnaround/Chrysler roll-up

FTPLF  2.6% Idea from CB&F/no catalyst IMHO

INTL      6% Leucadia owns large share/LT holding hasn't done much

JMBA    6.8% Idea from CB&F/juicing is in vogue/like the jockey and his "promise"

SD        3.6% Owned on/off for years/think Ward is better than McClendon/Activist stock may gap up

SHLD  13.2% Idea from CB&F/value of brands will surprise folks someday

ELOS    8.5% Coattail Klarman/seems like a good growth business but hasnt...

UTRA      .1 % Stupid speculation/-95%

LVLT      .1% See above/sentimental holding

SH        10%  Trade these two shorts in/out rather than sell the above

QID        8%

Margin    35%

 

Other than these stocks, I own 100% BRKB in a company 401K. Feel free to critique. Thanks to all here, especially those that brought good positions (MBI) to my attention and Sanjeev. -willie

 

 

[LC]

For those of you who chose to buy options, I'm curious to know what your thinking was? I looked at the LEAPS when it was in the mid 40s and saw that the cost of leverage was pretty damn high, and so I decided instead to make the equity a large position of my portfolio, like merkhet.

When the stock fell in May to the $50.00 range is when I became interested. Knowing the history of Eddie & Bruce (i.e. their history of buying back shares), it was almost reminiscent of the leveraged BRK trade when it was at 110% of BV and Warren had stated they would buyback shares at that price. Not a perfect analogy but that was my thinking.

 

I watched the stock fall slowly over the next week or two...I wanted to purchase LEAPs but the implied vol was too high. I believed (and still do) in the RE thesis and the extreme concentration of ESL/Fairholme...I didn't see as a bad thing for the thesis! This is abouts when Ericopoly was discussing his purchase of these contracts for the tax write-off. But as the implied vol was so high on the options I purchased a stake in the common with a cost basis of around $46/sh. Over the next two months the common fell but the implied volatility on the LEAPs fell much more. The LEAPs I looked at (Jan 15 - $50 strike) traded down from about $10/contract in June to around $4.50/contract in August. I sold out of the common and into the LEAPs. Half my position was sold today at a price of $12...the rest we will see...I just wish I had put more into it :(

[A_Hamilton]

Anyone know why SHLD issues its debt/revolver at the hold co. but then doesn't have Sears Re guarantee the debt? If Hold Co. goes BK won't't creditors still receive Sears Re asset value? I don't understand why debt wouldn't be issued at subs....feel like I am missing a big part of the story here.

[ScottHall]

Anyone know why SHLD issues its debt/revolver at the hold co. but then doesn't have Sears Re guarantee the debt? If Hold Co. goes BK won't't creditors still receive Sears Re asset value? I don't understand why debt wouldn't be issued at subs....feel like I am missing a big part of the story here.

 

The revolver is at SRAC and Kmart, but is guaranteed by Holdings. The only debt at Holdings is the $1.2 billion note. I agree that is a big possibility regarding Sears Re.

[Kraven]

Anyone know why SHLD issues its debt/revolver at the hold co. but then doesn't have Sears Re guarantee the debt? If Hold Co. goes BK won't't creditors still receive Sears Re asset value? I don't understand why debt wouldn't be issued at subs....feel like I am missing a big part of the story here.

 

The revolver is at SRAC and Kmart, but is guaranteed by Holdings. The only debt at Holdings is the $1.2 billion note. I agree that is a big possibility regarding Sears Re.

 

They didn't have Sears Re guarantee the debt because they didn't have to. That is, there were able to get the debt issued without needing to utilize Sears Re as a guarantor. Good negotiating on their part. If Holdings went bankrupt lenders under the notes would potentially be able to go after Holdings' equity in Sears Re if there were insufficient assets at the guarantors or they were otherwise unable to pay. This would be as an unsecured creditor however. Note though this is where things get interesting. Lampert owns a slug of various debt tranches and some trade receivables. Given his fingers in all parts off Sears it would likely be time to play lets make a deal. He would presumably be in the drivers seat and be able to arrange for creditors to be paid off. There would likely be more and faster upside to creditors to play ball with him then to go through a lengthy bankruptcy process. Just my opinion.

[ScottHall]

Anyone know why SHLD issues its debt/revolver at the hold co. but then doesn't have Sears Re guarantee the debt? If Hold Co. goes BK won't't creditors still receive Sears Re asset value? I don't understand why debt wouldn't be issued at subs....feel like I am missing a big part of the story here.

 

The revolver is at SRAC and Kmart, but is guaranteed by Holdings. The only debt at Holdings is the $1.2 billion note. I agree that is a big possibility regarding Sears Re.

 

They didn't have Sears Re guarantee the debt because they didn't have to. That is, there were able to get the debt issued without needing to utilize Sears Re as a guarantor. Good negotiating on their part. If Holdings went bankrupt lenders under the notes would potentially be able to go after Holdings' equity in Sears Re if there were insufficient assets at the guarantors or they were otherwise unable to pay. This would be as an unsecured creditor however. Note though this is where things get interesting. Lampert owns a slug of various debt tranches and some trade receivables. Given his fingers in all parts off Sears it would likely be time to play lets make a deal. He would presumably be in the drivers seat and be able to arrange for creditors to be paid off. There would likely be more and faster upside to creditors to play ball with him then to go through a lengthy bankruptcy process. Just my opinion.

 

That could be, but I'm a bit too cautious to rely on that. Also don't forget that just because the SRAC/Kmart credit line is adequately secured now doesn't mean that it always will be if operations continue to deteriorate. Any deficiency could also end up at Holdings, though admittedly there's a lot of unencumbered real estate at the retail subsidiaries to cover that assuming they don't mortgage it to keep operations going.

 

It's hard for me to see a margin of safety here. The SRAC debt could be interesting in BK considering the Sears, Roebuck guarantee. I'm still in "wait and see" mode for every security in the structure, though. I am open to changing my mind regarding any of them if my understanding of the matter changes.

[hyten1]

www.bakerstreetcapital.com/BakerStreet_SHLD.pdf