mevsemt

SHLD just announced they're closing up to 120 Kmart and/or Sears full line stores. http://finance.yahoo.com/news/Sears-close-120-Kmart-Sears-rb-4129537619.html?x=0. Could get interesting... thoughts?

Funny you should bring it up... I bought yesterday... http://mevsemt.blogspot.com/2011/12/kmart-smart.html

I echo netnet's sentiments. Klarman bought these because he recognized value at the price he was paying, as he would say he was acting as a "provider of liquidity". Now that he owns these loans, he has a responsibility to his LP's to get a reasonable price when he sells them. He probably has a "fair price" in mind, and the proposed settlement just didn't get there. I don't think he expects 100 cents on the dollar, I think he just wants the settlement to get to his "fair price." If you were in his shoes, what would you do?

Here's one place to start: http://securities.stanford.edu/1036/SHLD_01/2007511_r01c_064053.pdf From page 23-24: On August 23, 2004, Kmart announced the final agreement for the sale of 18 stores to Home Depot for $271 million in cash. That agreement was comprised of a sale of 4 owned stores for $59 million, or $14.75 million per store. It also included the sale of 14 leased stores for $212 million, or $15.143 million per store. On September 30, 2004, Kmart announced it had completed the sale of 50 stores to Sears, Roebuck (4 owned stores, 45 leases transferred and 1 owned store leased to Sears, Roebuck) for $575. 9 million . This equates to a per store value of $11.520 million. While Lampert's sales of those 68 Kmart stores represented the sale of only 4.49% of Kmart's real estate assets, those sales fetched the astonishing sum of $846.9 million. Obviously one thing to keep in mind is that present-day Sears owns/leases the stores that Kmart sold to Sears before the merger. Also, the other key takeaway is how much value is in the leases...

Here's an old, but still relevant, post I did on my blog: http://mevsemt.blogspot.com/2010/11/transaction-alert-sears-holdings-2013.html. If you click on the "zz Sears" label on the right you can see all my Sears posts. As for a "take under" I think it's highly unlikely. For example there's Autozone. In 1997 Eddie began building his AZO stake through ESL and quickly acquired enough shares to get himself elected to the Board. Between 1997 and 2001 AZO's stock bounced around madly, going back and forth between 20 and 40-ish. During this time Eddie used a massive buyback to shrink Autozone's share count from 150 to 100 MM (btw I'm sure there were plenty of people saying things like "he was buying back shares at 38, and now they're at 20, so clearly he doesn't know what he's doing..."). Fast forward to today and the stock trades at $300+ and share outstanding is something like 40 MM. In fact, if you look at the 15 year chart there's almost nothing like it. www.mevsemt.blogspot.com

ixnay on the allyray!

They didn't actually sublease the properties in St. Louis, rather they made them available for sublease. In fact, they've made about 3,800 properties available (http://blogs.barrons.com/stockstowatchtoday/2011/09/27/sears-jumps-is-eddie-lampert-turning-it-into-a-real-estate-company/?mod=yahoobarrons). It's interesting, if they had done this in 2006 the market would've gone nuts and you'd have had a $250 stock price (IMO). Today however, the market just yawns and the stock stays in the $50's.

Depends on how you define leverage, right? Even before the days of Berkshire, I'd say the comp structure of Buffett's investment partnership could be called leverage.

Interesting... so both Bienvenue and Keil come from LUK... LUK has done commercial/residential real estate development on the FL panhandle... Berkowitz has been a LUK investor for something like 20 years... Here's what I wrote when I bought JOE a couple months ago: http://mevsemt.blogspot.com/2011/05/new-coattails-to-ride.html "Finally, after 10+ years I think there's a very real chance that JOE looks a lot more like a Leucadia or Brookfield Asset Management than its current self, which would make an investment at today's prices an absolute home run." Obviously I have no idea if this will turn out to be right, but these recent hires give me hope...

Kenmore at Costco? http://online.wsj.com/article/SB10001424053111903927204576570981187148462.html?ru=yahoo&mod=yahoo_hs I'm long SHLD, so maybe I've got rose-colored glasses on, but IF (big IF) SHLD is going to go through some form of transformation, isn't this how it would likely start (Diehard licensing, Craftsman at Costco, Orchard Supply spin-off, Kenmore [maybe] at Costco)? BTW here's my basic SHLD thesis if you're interested: http://mevsemt.blogspot.com/2010/11/transaction-alert-sears-holdings-2013.html

Awesome article! I've got it printed and highlighted at home. Also, i wrote a quick post (about a year ago) on my blog if anyone is interested: http://mevsemt.blogspot.com/2010/09/uu-investing.html

Given that AIG occupies something like 20% of his assets, I'm wondering if AIG is a similarly attractive opportunity (as opposed to BAC) as WFC in the early 90's.

I agree that the CEO is definitely part of the story, but I think an equally significant part of the story is Ackman's capital allocating skills and Roth's real estate experience. BTW I'm also long Sears... Maybe I need to join a support group, "Hi, I'm MEvsEMT, and I invest in crappy mall based retailers." After all, step 1 is admitting you have a problem... ;)

White collar workers quitting their jobs to become day traders... internet bubble. Nurses quitting their jobs to become real estate agents... housing bubble. Now people are quitting their jobs to throw sell-your-gold-tupperware-style parties... I personally have no idea if gold is over or under priced (but I have asked my wife if she has any old gold jewelry she doesn't want anymore). As an afterthought, the tone & mutual respect on this thread is a welcome relief after reading the recent BAC posts.

Does anyone have any thoughts on JCP? On a numbers basis alone it seems reasonably priced, but the thing that attracted me was 1) common shareholders are directly aligned with management/BOD and 2) common shareholders are investing alongside Ackman/Roth/Johnson. Taken together, this seems like a pretty unique opportunity. BTW I recently bought shares (http://mevsemt.blogspot.com/2011/09/more-retail-great.html).

I've been watching GPS too. On a numbers basis alone it looks cheap, but the company is facing some stiff headwinds, so it's "cheapness" isn't entirely unjustified (at least IMO). The thing that really caught my eye is the buybacks. Over the last 7 years the company has gone from 991 MM shares to 550 MM shares, and their buybacks have only been increasing. Over the same time period their revenue has fallen from 16.3 B to 14.6 B, but free cash flow has been relatively flat averaging around +1 B. My take is there's some "optionality" here - if they actually hit a fashion trend and get their revenue to grow this stock could be a homerun, but in the meantime they're doing the right thing by aggressively retiring shares.

Well I hope you're right... btw the new CFO seems to be a change-type guy... http://en.wikipedia.org/wiki/Robert_Schriesheim I don't think Eddie would've hired him (and I don't think Schriesheim would've accepted the offer) unless some sort of transformation was on the horizon...

Orchard Supply spinoff... now Craftsman in Costco. Are things about to get interesting? http://www.chicagotribune.com/business/ct-biz-0831-sears-costco-20110831,0,1284253.story

That's a good question - it'd probably be pretty easy to back into his approximate returns since he only owns like 3-4 major positions at any given time. I'd say his returns can't be that bad just from looking at a chart of Autozone; mid-20's to 290 from early 2001 through present.

I don't think there's more leverage... you have to keep in mind there was a 10 for 1 reverse split on the common stock. In other words, I think you need 10 warrants to get 1 share.

Quick and dirty analysis of SHLD's ownership, buybacks, and short interest: http://mevsemt.blogspot.com/2011/03/short-analysis.html

Morningstar opportunistic investor is pretty solid, it's $200 per year but you can do a 2 week free trial. The website is mgi.morningstar.com. They cover a bunch of stuff including spinoffs, tarp warrants, contingent value rights, as well as stocks the authors think are just plain cheap. Personally, I use it as a source of ideas, and if I had to guess I'd say I've invest in about 10% of their ideas, making it well worth the price for me.

FWIW there's only been insider buying at PHM and BZH (not a ton, but at least someone within the company like their prospects).

IMO this is an interesting little case study on investor psychology. As I see it you've basically got 2 "things" going on during the last 6 months: 1)Involvement with JOE and 2) Lagging performance. People generally have strong, almost visceral, emotional reactions to loosing money (or seeing their neighbor make more money). So having Berkowitz's involvement with JOE coincide with his lagging performance is giving everyone an easy "out." In other words, I wonder if people are selling Fairholme because performance is lagging but telling themselves they're selling because of JOE? So let me ask this: if Fairholme's performance had been stellar during his involvement with JOE do you think the fund would've faced the same redemptions? My guess is "no." In fact, I think people would've enthusiastically supported his involvement, saying stuff like "Berkowitz isn't afraid to get his hands dirty on behalf of his shareholders at Fairholme," etc. Now let me ask this: if Fairholme had never been involved with JOE but still had 6 months of lagging performance do you think the fund would've faced the same redemptions? My guess is "yes," but in this case people would've found some other convenient reason to justify selling. Anyway, just my 2 cents...

Sounds like it... http://seekingalpha.com/article/199056-berkadia-commercial-mortgage-a-closer-look