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I've read articles about Eddie Lampert being the next Buffett and his success in AutoNation and AutoZone. But, when I look at gurufocus and his purchases ... he's had some real stinkers like CIT Group, Citigroup, Gap, Home Depot,.... The high end home goods store... which escapes me right now, but they've been unprofitable and he tried to buy them out several years back. I really don't see how ESL survives with these types of BS investments. Don't get me wrong, Buffett had some stinkers like the Irish Banks and USG, but... seriously, I wonder about Eddie's batting average.

Did you noticed he stopped buying back shares this quarter even at these depressed prices?

I know Monhish Pabrai mentioned he is into some Japanese stocks, but not sure what. He is finding some great values there. I know Marty Whitman have found some great Japanese REITs with some Class-A properties. I invested in some Hong Kong stocks, but doing it in Pink Sheets (OTC) was always a killer to control the commission and spread. Has anyone found any lucky in Japanese stocks? ADRs?

I would use it too!

Richard, Good writeup and summary. Too bad I'm in Washington, DC. I would have loved to join!

Maybe you are recalling an interview with Jonathan Dash of Dash acquisitions: http://classic.cnbc.com/id/15840232?video=1497317094&play=1 Is Linnartz one of the individuals on the video?

I know there is a relationship between Sardar Biglari and Johnathan Dash of Dash Acquisitions. Dash has generally been in similar investments as Sardar. Dash Acq. is and was an activist/investor in Denny's. I do not believe Sardar made an investment in Denny's with Dash. I would love to know the background discussion and conversations if anyone knows it.

I've been wanting to do more research on Carlos Slim. There was a lot of fanfare about him when he was #2 or #3 richest men in the world. He was right along side Buffett and Gates. I believe his Mexican holdings (Telemex, Cemex, etc) have been slammed lately. Most of those companies are monopolies in Mexico and it doesn't take a lot of thought on why he's so rich. With the politics in Mexico, he has a lot of clout. Yet, I tried to invest in Telemex during the Clinton (NAFTA era) and don't remember it being an amazing investment. Cemex -- I'm debating, and can't really pull the trigger. Are any Carlos Slim investments good/safe buys?

mevsemt - That's a interesting thought. A couple of questions and thoughts: 1) Sears has been a good investment for ESL from bankrupcy. It's just hasn't been an amazing investment post-bankrupcy. But, I see a lot of hatred and negativity in Sears, which I read about for Amazon and Jeff Bezos too. I still think it's early in the game. I don't think Eddie is doing anything out of desperation. It's not a world-class company yet, but it's not overleveraged and net-net, cash flow positive every year. 2) Sears is Eddie's largest position (ESL). He was the next "Buffett" prior to his Kmart/Sears merger. His returns were 20%+ a years? Is that true? Also, post-merger, do you know how ESL has performed? Anyone have that info? Is he still beating the market? 3) The Gap report must have hurt him.

It's just sad the path that he taking especially when he was building such a following. Myself, I sold SNS/WEST last year after being feedup with his games and double talk. I wanted to ask the board -- you might not want to be a fellow shareholder once he takes over a company, BUT, would you invest in his activist holdings such as: CAW and Penn National?

Good question. Only Eddie knows, but through ESL, Eddie can buy Restoration Hardware, Sears, Autozone without an admission that Sears is crap. If Sears would buy any company with its FCF, it would be an admission that they have given up and would need Gap to run the ship. That long bomb would definitely throw even long term shareholders in a spin. Plus, he has not outward talked about Sears being an investment vehicle like BRK. He still considers it a retailer with a lot of real estate properties -- not an hedge fund or investment vehicle.

It's pure speculation on my part, but Gap management has the brand management and retail experience that he wants at Sears. Also, the management is very shareholder friendly and is very cautious with their FCF. Instead of breeding inhouse, he might want to leverage Gap management with Sears' larger footprint and retail coverage. Gap has been successful segmenting their high end - Banana Republic brand with his normal consumer brand - Gap. It might help me differentiate Sears and Kmart. Just my IMHO.

Did anyone goto the SHLD annual shareholder meetings? I would be interested in any notes. Did you notice that Eddie Lampert has been adding to his Gap position? Do you think he's going to try to merge Sears and Gap? Thoughts? I know he's been testing Forever 21 pilot stores in Sears. Adding Gap to the mix? I would have prefer he went after J.Crew, but I guess he walked away from that. I never got his investment thesis on Restoration Hardware either. Cool store, but way overpriced for any normal consumer.

Fellow boardmembers, Can someone clarify WEB's comment about getting a return on invested capital that is "something that's worth that for our shareholders?" "It's much more intelligent for people to leave the money in and sell off a little bit if they need the cash. There will come a time, who knows how soon, when we do not think we can lay out $15-20 billion a year and not get something that's worth that for our shareholders." I know he wanted to get a $1 return for a $1 invested. But, how does that work out? If he invest in $1, getting another dollar is 100% return on capital in a year? Even if he was discounting cash flows, $1 dollar invested at 10% will be discounted back to NPV as $1 invested.. but, what if your return is 3%... the NPV will get your $1.. but, many years down the road. What type of huddle rate or ROIC is he ask about before a dividend?

Bronco - Full disclosure, I do own SHLD. But, I agree with you $80 with this amount of uncertainty is not necessarily a table pounder. $60 it becomes compelling, but definitely something I'm not nibbling or buying right now. Given that WEB mentioned that the housing market would not fully recover for another 2-3 years, I'll like to stick around and see what ESL performs in a good market with people buying appliances.

I have 2 friends that worked at Sears and been in meetings with Eddie. One, in terms of starving, what investment do you think Eddie should make at Sears? I've been to the stores lately and they're clean, well-lit, and personally, a bit overstaffed. Am I enamored by the product mix? No. Do I fear for my life when I walk in? No. Are there people in there? Yes. How can Eddie draw in more people without giving away stuff? No clue. Even if this "subpar" shopping experience, does it make money and have people buying items. Suprisingly, yes. I don't know of any capital/store investment that he needs to make. There's no fat pitch right now that says.... If Eddie invested 200 million, it would make the customer experience so much better and return 30% on capital. He's just treading water until something in the R&D data shows up. From my colleagues, they mentioned he's investing in a lot of small R&D projects in data warehouses, myGofer, Customer Loyality program, also piloting stores-within-stores. (i.e. Forever 21) Have any of them been earth-shattering -- no. But, it does not mortage the house. And if they show promise, I'm assured he'll double down big. For those stores that don't return their ROIC, I appreciate him closing them to conserve capital. Although, it reduces footprint, it's wasted footprint. Why be big for sake of being big. He is not building new stores. He's reducing footprint to his core -- which is the proper strategy to employ. As for buying shares, Eddie probably knows the intrinsic value of the core stores -- if he needs to circle the wagons and go with his top stores and the amount of CF they will provide. I still think it'll be profitable. Right now, we're debating about what he's doing with his extra cash flow. There's a lot of company, which would kill for positive CF. His stock purchases show the shares are discounted over what he considers to be his best investment options available to him. I would pay off his debt, but he did a lot of that already and his discount rate is so late... the shares are probably better investments.

Hmm.. maybe, Eddie Lampert should go to the least competitive landscapes and pummel the competition. Having said that, do you think it's only a matter of time, where the "game" is stepped up by Walmart/Target and other competitors? The comment above say the business model is still flawed, but it's like in the land of the blind, the one-eye man is king. It's only a matter of time before great competition comes to Canada, right? Don't Warren and Charlie have something to say about this? Something to the effect of upgrading plants or making a product line more efficient doesn't do much for a competitive advantage in the long run, since competitors can come in and do the same thing? Don't get me wrong, I'm not writing sears off, just saying that they will probably never be wmt or tgt; if purchased at the right price, every company can be a good deal. Yes, I remember that comment too. I believe it was said in terms of Berkshire Hathaway and new looms and plant equipment. Essentially, that investment pays for a little bit, but then competitors build similar plants and at times, get newer equipment at lower prices. It's not a sustainable model to keep investing in equipment. That's why he likes See's candies, which has relatively low capital investments and product is not commoditizes since you wouldn't spend 50 cents less for a box of Valentines day candies for your sweetie. What is interesting is WalMart's model has been known for 40 years, yet it continues to survive. I believe it's the culture of being the low cost provider and thought leadership. If you have to re-invest to keep up with the Jones, your business model has to be top dog to eck out every ounce of profit. Examples being Intel and Walmart. Their cost structure keeps competition alive, yet at bay. Regarding Sears, it's not the best in class, yet is the business model relevant to survive as a #2, #3, or #4. Eddie just needs it to be cash flow positive and not herromage money (a la Berkshire Hathaway in the early days) From the outside, I think it can self sustain and "buy time" for a redeployment into other businesses. Please note Eddie bought Sears at like 20 cents on the dollar... If he gets a return of 2 cents per year -- based upon his original cost basis, he's getting 10%. At 80 cents, you're not feeling so good.

Hmm.. maybe, Eddie Lampert should go to the least competitive landscapes and pummel the competition. Having said that, do you think it's only a matter of time, where the "game" is stepped up by Walmart/Target and other competitors? The comment above say the business model is still flawed, but it's like in the land of the blind, the one-eye man is king. It's only a matter of time before great competition comes to Canada, right?

What about Sears Canada makes it a better run company? Is the competitive landscape that much different in Canada? Competitors weaker? Considering Sears Canada is a better run retailer, is it being used as a proof of concept for Sears US? Also, who runs the pension funds for Sears Holding? Does Eddie run it in one shape or form? If so, with his returns and a good market, it could becoming overfunded in the near future. Thoughts?

I only see LEAPS for 2013 on Yahoo. He bought 2015 calls. Is this a custom transaction that only institutional buyers have access to?

All, Tis the time of the year again, I'm trying to finish my taxes. Much like other members of the forum, I sold my SNS shares last year with Biglari's antics. I thought it was a buy-n-hold, but I guess not. As such, I need to figure out my CGs as I had both Western Sizzlin' and Steak-N-Shakes. I know WEST got translated into a bond, shares in SNS, and fractional payouts. How do I allocate my cost basis with the bond and my WEST converted to SNS shares? Help, please.

The revenues will decline because they are selling off units and closing down ill-performing stores. As such, the revenue trend is downward, but it's a good thing they are 1) repaying high cost debt and/or 2) reinvesting in the high ROIC (Sav-A-Lot). Declining revenue is bad, but if the company has been dissarray and bad investments -- the divesture/closure is the best strategy and the trend is to be expected.

I've been following the thread on the bank warrants and enjoying the great analysis. On paper, 8 years looks like an eternity for the banks to go back to book. Yet, I see a position in my portofolio (namely, PFE) -- which I've held since 2006. It's still below water. :'( I know there's the whole pipeline discussion in the industry, but looking at the cashflow, valuations and ROI of these healthcare companies (AMGN, MRK, JNJ, etc.), would have you accepted it would be dead money for this long? I know they were overvalued before. Why would banks not fall into this dead money category? Given a 8 year time frame and warrants, would you make the same bet with home builders as a category? There were some survivers? Some consumer retailers fall into this same category of dead money for 5 years -- WMT and PG. Thoughts?

If Sears Holding is 90.4% owner of Sears Canada, Sears Holding will be getting some cash back -- albeit double/triple taxation? (2 at SCanada and 1 SHolding?) I wonder what EL will do with it? Pay down debt? Also, do you know the terms of the loan is?

Is anyone concerned about the "Total Annual Fund Operating Expenses" of 5.22%? I know it's capped now at 1.75%, but even 1.75% is pretty high. When it becomes uncapped, 5.22% is a huge hurdle. Thoughts?