SHLDQ - Sears Holdings Corp

[merkhet]

 

 

Can someone explain why most of the articles written about the Baker Street report say that they were unwilling to disclose their real estate appraisers when they list "Green Street Advisors" in their presentation? (I'm referring to page 56...)

 

 

The articles also say that the report caused the stock price to increase from $40-$60+.  Baker Street's report came out (at least it was emailed then, it may have been distributed to other people prior) September 9th, when the SHLD was already trading at $53+.

 

 

So... shoddy journalism then. :)

[merkhet]

Since both the CS report & the articles that cite the CS report indicate that the Baker Street numbers are optimistic, I decided to do my own spot check of their revealed valuations against my list of tax assessed values. (I used the lower of both cap rates & rental rates.)

 

Arizona

 

10001 N Metro Pkwy, Phoenix, AZ

Baker Street: 10% cap rate, $5 rent, 212,787 sq. ft. -- $10,639,350

Tax Assessed: $8,570,000

 

California

 

100 Brea Mall, Brea, CA

Baker Street: 6% cap rate, $6 rent, 152,330 sq. ft. -- $15,233,000

Tax Assessed: $14,251,409

 

20700 S Avalon Blvd, Carson, CA

Baker Street: 6% cap rate, $5 rent, 175,454 sq. ft. -- $14,621,166

Tax Assessed: $14,096,547

 

2100 N Bellflower Blvd, Long Beach, CA

Baker Street: 6% cap rate, $5 rent, 140,896 sq. ft. -- $11,741,333

Tax Assessed: $12,677,870

 

3755 Santa Rosalia Drive, Los Angeles, CA

Baker Street: 6% cap rate, $5 rent, 140,134 sq. ft. -- $11,677,833

Tax Assessed: $17,771,661

 

Their numbers certainly don't seem to be wildly off the mark. Again, chalk one up for shoddy journalism, I suppose.

 

[EDIT: Added two more spot-checks to show it's not always the case that Baker Street's appraisal exceeds the tax assessed value.]

Baker_Street_Real_Estate_Appraisal.pdf

Tax_Assessment.pdf

Phoenix_02.pdf

Brea_01.pdf

Carson_01.pdf

Long_Beach_01.pdf

Los_Angeles_01.pdf

[Luke 532]

Can someone explain why most of the articles written about the Baker Street report say that they were unwilling to disclose their real estate appraisers when they list "Green Street Advisors" in their presentation? (I'm referring to page 56...)

 

I have a PDF version of Baker Street's presentation but I do not see "Green Street Advisors" listed on page 56 or anywhere else.  Could you upload a copy of the presentation you're looking at?  Thanks.

[merkhet]

 

 

Can someone explain why most of the articles written about the Baker Street report say that they were unwilling to disclose their real estate appraisers when they list "Green Street Advisors" in their presentation? (I'm referring to page 56...)

 

 

I have a PDF version of Baker Street's presentation but I do not see "Green Street Advisors" listed on page 56 or anywhere else.  Could you upload a copy of the presentation you're looking at?  Thanks.

 

 

It's in the attachment page to my previous post. Bottom of the page.

[Luke 532]

 

 

Can someone explain why most of the articles written about the Baker Street report say that they were unwilling to disclose their real estate appraisers when they list "Green Street Advisors" in their presentation? (I'm referring to page 56...)

 

 

I have a PDF version of Baker Street's presentation but I do not see "Green Street Advisors" listed on page 56 or anywhere else.  Could you upload a copy of the presentation you're looking at?  Thanks.

 

 

It's in the attachment page to my previous post. Bottom of the page.

 

Very strange.  See page 56 of the attached PDF.  It only shows "Baker Street Analysis" as their source, yet the attachment on your recent post shows "Baker Street Analysis and Green Street Advisors." 

 

Further, Green Street takes a jab at SHLD in a recent article: Redevelopment "makes for good sound bites, but in reality Sears has done little of it," says Cedrik Lachance at Green Street Advisors, a real-estate research firm.

http://online.barrons.com/article/SB50001424053111903891504579121603785394482.html#articleTabs_article%3D2

 

Any ideas?

SHLD_-_Baker_Street_analysis_September_2013.pdf

[merkhet]

Huh. Not sure.

[Luke 532]

SHLD tops the list of most-hated stocks according to money managers. 

http://online.barrons.com/article/SB50001424053111904462504579135833535241144.html#articleTabs_article%3D0%26articleTabs%3Darticle

 

"Our inclination remains to run from the popular and embrace the hated where prices tend to reflect such mistrust... we eventually get it right by seeing beyond temporary conditions and by avoiding diversification that leads to mediocrity."

-Bruce Berkowitz (May 31, 2011, Fairholme's semi-annual letter)

[stahleyp]

http://finance.yahoo.com/news/18-depressing-photos-show-why-122600100.html

 

Same old, same old, but kinda funny...and sad.  :P

[heth247]

http://finance.yahoo.com/news/18-depressing-photos-show-why-122600100.html

 

Same old, same old, but kinda funny...and sad.  :P

 

But I am surprised that there are ~9000 comments to that article. Not only is SHLD one of the most hated stock, but also is Sears one of the most hated retailer.

[BTShine]

http://finance.yahoo.com/news/18-depressing-photos-show-why-122600100.html

 

Same old, same old, but kinda funny...and sad.  :P

 

But I am surprised that there are ~9000 comments to that article. Not only is SHLD one of the most hated stock, but also is Sears one of the most hated retailer.

 

I saw that, too!  Blown away by the number of comments (indirectly the amount of attention given to the article).  I think it had around 90,000 views.  Amazing.

[muscleman]

http://finance.yahoo.com/news/18-depressing-photos-show-why-122600100.html

 

Same old, same old, but kinda funny...and sad.  :P

 

But I am surprised that there are ~9000 comments to that article. Not only is SHLD one of the most hated stock, but also is Sears one of the most hated retailer.

 

Yep. This means that turning it around will be harder and harder. Probably only a managed retreat would work.

 

Does anyone know if Bruce and Eddie bought any shares recently around $40? I don't see any filings. ::)

[heth247]

Does anyone know if Bruce and Eddie bought any shares recently around $40? I don't see any filings. ::)

 

I don't know but I am sure if there is any Luke will post here within minutes of filing.  :)

[phil_Buffett]

http://finance.yahoo.com/news/18-depressing-photos-show-why-122600100.html

 

Same old, same old, but kinda funny...and sad.  :P

 

But I am surprised that there are ~9000 comments to that article. Not only is SHLD one of the most hated stock, but also is Sears one of the most hated retailer.

 

Yep. This means that turning it around will be harder and harder. Probably only a managed retreat would work.

 

Does anyone know if Bruce and Eddie bought any shares recently around $40? I don't see any filings. ::)

 

i think nothing new from Eddie. bruce bought some in Q2 http://www.gurufocus.com/gurutrades/SHLD

 

884.200tsd Shares around 42$-59$

[Luke 532]

Does anyone know if Bruce and Eddie bought any shares recently around $40? I don't see any filings. ::)

 

I don't know but I am sure if there is any Luke will post here within minutes of filing.  :)

 

Nice jab, but warranted :)  I only hold a handful of companies and I do this full-time so I tend to follow my holdings pretty closely.

[Luke 532]

Re-reading through some of my notes and came across this which I don't believe has been shared on this thread...

 

http://www.bloomberg.com/video/sears-in-death-spiral-under-lampert-cohen-says-Y~K9HiLBTO2kWNnM8dmv4g.html

 

Mark Cohen, former Chair and CEO of Sears Canada, said the following around the 2-minute mark in June 2013: “He has a viable strategy for himself and he has done a brilliant job of stripping the assets of the enterprise since he’s taken over.  So he’s doing fine, he and his cohorts will come away with tremendous gains.”

 

Watch the video and you’ll get a sense of how much Cohen loathes Lampert.  It sounds an awful lot like Cohen is just crying because he knows Sears as we know it today won’t exist in the same form in the future.  But it’s pretty telling that he knows that Lampert will make tremendous gains.  As a capitalistic investor (shareholders), the latter should be more important than the former.  As a man (Cohen) whose very profession depends on the current format being preserved, you can see why he wants to preserve the status quo and has a heavy dislike for the capitalistic Lampert. 

 

[constructive]

Do you think Cohen believes more strongly that Sears has an aimless, dying retail strategy, or that Lampert's strategy will unlock tremendous value?

 

Do you acknowledge Cohen's expertise when it comes to SHLD value but discount his thoughts when it comes to their retail strategy? Considering his background (operational not valuation), shouldn't it be the other way around?

[Luke 532]

Do you think Cohen believes more strongly that Sears has an aimless, dying retail strategy, or that Lampert's strategy will unlock tremendous value?

 

The former.

 

Do you acknowledge Cohen's expertise when it comes to SHLD value but discount his thoughts when it comes to their retail strategy? Considering his background (operational not valuation), shouldn't it be the other way around?

 

I agree completely.  My point was that the retail operations in the form they exist today are more than likely not the end-game, yet that is where the vast majority of the SHLD discussion in the media takes place. 

[Luke 532]

I’ve thought about the combination of a long-term investment in which I’m bullish and the potential epic short squeeze.  This will sound odd, and it’s certainly not a value investing principle, but the strong possibility of a squeeze could almost serve as a “margin of safety” (I’m using that term VERY loosely to make a point) for those that are not convinced of SHLD’s long-term potential.  The trading range has been roughly $40-$80 for the past year or so… without any real squeeze to speak of.  The possibility of a squeeze at some point seems fairly likely.  If somebody is unsure as to the long-term prospects of SHLD, or they really like the upside but are unsure of the downside, they could buy the stock in the low-$40’s with the expectation of a squeeze.  If the stock gets to $65-ish one could then buy the $45-strike puts for, say, $5 (or whatever the prices would work out to be)… thus ensuring no loss of your capital.  If the stock continues to rise indefinitely commencing Lampert's "Berkshire moment" then all you have lost is the $5 option premium.  If the stock plummets, proving your hesitation to invest in the first place is correct at least in the short-term, then you have lost nothing. 

 

This isn’t something I necessarily recommend but if we do get a squeeze buying a put at that time could be a strategy for those not 100% sold on the long-term prospects of SHLD.  Again, just a thought.

 

Well, it did go from $38-ish to $66-ish since this was mentioned (just lucky I guess).  Same strategy still applies from today's price of $55 up to probably $90-ish given that the short interest as percentage of float is roughly the same.  I'm still not buying puts per this strategy but it might be of interest to some people.

[BTShine]

"Sears looks like a bomb shelter"

 

"Outrage" 

 

"Consumers demand and deserve more for their dollars" 

 

"It's gone viral (this story)"

 

http://video.foxbusiness.com/v/2764040239001/is-retail-really-detail/?playlist_id=933116618001

 

That clip reminds me of how TV Pundits talked when discussing BAC around $5 or $6 a share in late 2011.  You can see the thrill on their face...it's fascinating.

[oddballstocks]

"Sears looks like a bomb shelter"

 

"Outrage" 

 

"Consumers demand and deserve more for their dollars" 

 

"It's gone viral (this story)"

 

http://video.foxbusiness.com/v/2764040239001/is-retail-really-detail/?playlist_id=933116618001

 

That clip reminds me of how TV Pundits talked when discussing BAC around $5 or $6 a share in late 2011.  You can see the thrill on their face...it's fascinating.

 

Except that people were still banking with BoA, the business had some issues, but was still intact.  This is anecdotal, but we were at the mall recently.  There are quarter rides right in front of Sears that my sons love, so each time we're at the mall we do these things.  During the time the boys rode the helicopter and robot no one walked in or out of Sears, this isn't surprising because no one was in there to start with.  Every other store had a steady flow of people in and out, even the niche stores that I'm surprised have customers.

 

Both Sears and Kmart have completely lost mindshare, how are they going to gain it back?  I know this is a real estate hedge fund transformation play, but the concern is that the dying retail sucks them dry first.  How are they going to attract customers?

 

Has anyone been in a Kmart recently?  I live in a nice area of Pittsburgh, the local Kmart has destroyed the shopping center they're at, the place is dirty, dis-sheveled, and full of empty shelves.  I was in there in the spring, went to the garden section, the shelves were empty, it looked like pictures from the Soviet Union.  Why isn't the store selling gardening items in the spring?  I have no idea. 

 

I agree with many posters that the story here is compelling, it makes fascinating reading and is fun to watch.  My concern is that the ball around Sears' ankle (the retail) is pulling it down faster than Eddie can swim and this is going to sink before Eddie & co can get to the boat.

[Parsad]

"Sears looks like a bomb shelter"

 

"Outrage" 

 

"Consumers demand and deserve more for their dollars" 

 

"It's gone viral (this story)"

 

http://video.foxbusiness.com/v/2764040239001/is-retail-really-detail/?playlist_id=933116618001

 

That clip reminds me of how TV Pundits talked when discussing BAC around $5 or $6 a share in late 2011.  You can see the thrill on their face...it's fascinating.

 

Except that people were still banking with BoA, the business had some issues, but was still intact.  This is anecdotal, but we were at the mall recently.  There are quarter rides right in front of Sears that my sons love, so each time we're at the mall we do these things.  During the time the boys rode the helicopter and robot no one walked in or out of Sears, this isn't surprising because no one was in there to start with.  Every other store had a steady flow of people in and out, even the niche stores that I'm surprised have customers.

 

Both Sears and Kmart have completely lost mindshare, how are they going to gain it back?  I know this is a real estate hedge fund transformation play, but the concern is that the dying retail sucks them dry first.  How are they going to attract customers?

 

Has anyone been in a Kmart recently?  I live in a nice area of Pittsburgh, the local Kmart has destroyed the shopping center they're at, the place is dirty, dis-sheveled, and full of empty shelves.  I was in there in the spring, went to the garden section, the shelves were empty, it looked like pictures from the Soviet Union.  Why isn't the store selling gardening items in the spring?  I have no idea. 

 

I agree with many posters that the story here is compelling, it makes fascinating reading and is fun to watch.  My concern is that the ball around Sears' ankle (the retail) is pulling it down faster than Eddie can swim and this is going to sink before Eddie & co can get to the boat.

 

These were the same issues around DQ for many years.  Berkshire/DQ were not investing a lot of money in the older stores, and only building new model stores.  Many of the older DQ's looked disgusting.  Only in the last 7-8 years have they started to put money into the older locations.  It seems as though value investors only worry about return on invested capital...if it doesn't meet a specific threshold, they don't care too much about what the store looks like. 

 

For every Sears store that looks like that one, I can go into another one and show how good it looks...not modern and up to date like Target, Macy's, etc.  But at least clean, with inventory, staffing, etc.  Granted Sears today is not Sears of yesteryear, but it isn't much worse than many other dying retailers. 

 

Eddie is not going to pour money into turning these stores around or making them look like Saks Fifth Avenue!  If he can stabilize them and reap a profit, great!  If not, shut 'er down, sell the lease or land, or possibly redevelop.  The assets and cash are better used elsewhere.  Cheers!

[turar]

If we do anecdotes, the Sears at Northlake Mall in Atlanta looked OK, in line with other anchor stores in that mall. I actually bought a pair of jeans there that I thought were a good deal, "Roebucks", didn't even know there was such a brand.

[Palantir]

Except that people were still banking with BoA, the business had some issues, but was still intact. 

 

This is the key. BAC was a case where there was overhang over the stock, but it was unrelated to the earnings power of the business. I think to really extract mileage out of these investments, you need to have both: low valuation + earnings power that can drag the business out of its valuation.

[Guest hellsten]

"Sears looks like a bomb shelter"

 

"Outrage" 

 

"Consumers demand and deserve more for their dollars" 

 

"It's gone viral (this story)"

 

http://video.foxbusiness.com/v/2764040239001/is-retail-really-detail/?playlist_id=933116618001

 

That clip reminds me of how TV Pundits talked when discussing BAC around $5 or $6 a share in late 2011.  You can see the thrill on their face...it's fascinating.

 

"Twitter"

"Zombies"

"Here's what's going to happen"

"Nobody goes in there"

"Why get depressed when going to Sears even if you get a discount"

 

Twitter and Zombies? At least the guy was happy to be on TV.

[OracleofCarolina]

http://finance.yahoo.com/news/lands-end-celebrates-chicago-area-170100145.html

 

stand alone Land's End opening up...as more Sears stores close maybe we will see more Land's End stores popping up.