Is Sears Holdings is an attractive investment at current levels? Specification seems determined to

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Edward Lampert (48) Current Position: Director and founder of hedge fund ESL and Sears Holdings chairman
Last week the company announced financial Seat Group (CIT), which will cease to provide loans or guarantees for transactions of third front retail company Sears Holdings. This news was negative in the continuum odd lots of bad news that attacked odd lots Sears investors, after another quarter with disappointing results that sent the stock decline 27% daily.
But the same week the largest investor learned Sears, Edward (Eddie) Lampert, is also its chairman, increased his holdings and bought shares worth $ 130 million. Transaction that was not made in the open market. Lampert bought the shares from the hedge fund he runs, and maintenance odd lots of which is the second largest Sears.
Eddie Lampert (48) started his career in 1984 at Goldman Sachs. In 1988 he founded the hedge fund ESL with an initial $ 28 million just raised. Since the partners achieved odd lots an average annual return of 29%, while today his portfolio managed $ 9.1 billion invested in 12 shares. And this is his strategy - the specification is investing "concentrations", who likes to focus on a relatively limited number of investments.
Lampert's failed investment Sears is the exception that proves the rule. The name of the specification records several phenomenal successes, most of which related to companies Retail. In 1998 the company odd lots invested Aotozon first specification, so its share is $ 30. Today is traded at the height of 344 dollars. At that time also invested Bautoniisn - this also proved to be an excellent investment.
Another odd lots example is the investment Quai - Mart. In 2002, when the company odd lots filed for protection from creditors, Lampert bought the controlling odd lots interest in the company by nearly a billion dollars. Specifications see the tremendous value the company owns real estate, and saved it from bankruptcy he sold only a small Sears's odd lots real estate and to Home Depot for $ 850 million, and regained most of the investment. He closed stores, cut employees, and under his leadership it has climbed from $ 15 in 2002 to $ 150 in three years. odd lots
In November 2004 it was decided to merge the K - Mart Sears. In the early years seemed successful merger: Adjusted operating profit before depreciation, amortization and taxes rose by 17% in 2005 and 23% more in 2006. During these years, Lampert Award for investors doctrine. He praised companies spending discipline and the ability to allocate capital odd lots properly. "Do not waste a fortune on stores just because we have the means and that everyone do so," wrote the specification.
Austerity policy has led to the first two years fine performance merger, but the real estate crisis that arose in 2006 began to be felt., But while other companies were able to recover from the crisis, Sears left behind. Seems that a combination of factors led to the failure at Sears. Throughout the years, analysts have accused the The policy of "minimum investment" of the specification of limitations branches, odd lots damage to brands and transforming the Sears irrelevant. analysts probably right.
Another reason for the downfall of Sears can be a change odd lots in consumer odd lots preferences, prefer to go the malls and go to stores that specialize in a particular type of products over visiting department stores; although you can also find department stores such as Macy's successful and Target.
Another contributing factor mutilation Sears business is the choice of specification to assign some of the cash the company produced a buy-back. In 2005, for example, the company spent $ 6.1 billion share repurchase. In 2006 the company spent $ 800 million and bought 6 million shares of its own at a price of 133 per share. To understand the significance of these numbers, we note that the current market value of Sears is a total $ 3.6 billion, and the stock is trading around $ 33. Although this wisdom after the fact, but if the specification was a little less investor buying back stock and a little more improvement over the shops, the shopping experience and strengthening brands - the story would have been different. odd lots
Specification is well aware of the criticism of him, and she seemed to bother him. In November 2007 he wrote to the partners: "When other companies manage their expenses carefully, it is usually accepted odd lots as a sign of good management and conservative. Event of Sears, keeping expenses is usually seen as a source of poor performance of the company." odd lots
Lampert also addressed one of his letters to investors decrease in sales at existing stores (SSS) of Sears. This index, so beloved analysts incomplete, assessing the specification, for two main reasons: First, the existing stores are defined as stores operating for at least a year, but it takes about four years to realize their sales potential. The result is growing networks and open more and more stores will naturally higher than SSS. Second, it is very easy through investments odd lots to create an immediate increase in SSS, but the contribution of investment over time is uncertain and may have ongoing odd lots price in profitability (reduced investment certainty over time, but there is no certainty that sales will rise).
Is Sears Holdings is an attractive investment at current levels? Specification seems determined to create a revolution in society. If he succeeds in that, there is no doubt that the stock will be worth more. The company currently trades at a sales multiple of 0.08 relative ridiculous sectors odd lots multiplier of 0.5.
Although the fair tempter, you can not ignore the problematic nature of the investment department stores and the continuing failure in managing the company, reflected the disappointing results. We would prefer to see a change odd lots in company strategy reflected in the results. Even if it means that the price of entry will be much higher than the current price.

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