Todd Sullivan's thoughts on Sears Holdings (SHLD)
Posted July 9th, 2008 by theStockMasters...
Following retail in general and the economy, I would expect the current quarter to be a poor one and perhaps more downside to shares.
Talk? No. He will do it with his actions though. He has the strongest balance sheet of any retailer enabling him to not only weather the current storm, but make deals if he wants to. Sears and Wal-Mart may be the only retailers who have that luxury right now. People focus way too much on sales and not the cost of those sales to the company. Just look at Steve & Barry's, 20% plus sales growth had way too high a cost. now they are done.
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The Masters had a chance to talk with financial blogger Todd Sullivan of ValuePlays about Sears. What better person to provide insight into Sears Holdings Corp. (NASDAQ:SHLD) other than Sullivan is there besides Lampert himself. With Sears on the mind, let's get into it.
1. First and foremost, SHLD shares are down from $175 to $72. How and why?
The economy, plain and simple. That and investors are waiting for Lampert to make a deal. The feeling is that there is value to unlock but Lampert has not really moved to unlock it yet. The new organization is a step in that direction but any moves are being thwarted by the economy. That being said, the table is being set for the future.
2. Now that share are $72, what can we expect?
Following retail in general and the economy, I would expect the current quarter to be a poor one and perhaps more downside to shares.
3. Eddie Lampert compared to Warren Buffett, is there any truth to this?
Yes. We cannot through out Lampert's 20 year track record due to a poor one or two years. They both take large stakes in a few firms they know very well. They both are value investors. They both have very long holding periods. Lampert will turn Sears into an investment vehicle. It took Buffett decades to build Berkshire before it went out of business. Lampert has owned Sears for what, almost 4 years?
4. Lampert once talked his way out of a kidnapping, can he talk Wall Street back into believing in SHLD? In case you missed that story, here it is covered by CBS News in 2003. How many CEO's do you know that have the charisma to calm down kidnappers with shotguns?
Talk? No. He will do it with his actions though. He has the strongest balance sheet of any retailer enabling him to not only weather the current storm, but make deals if he wants to. Sears and Wal-Mart may be the only retailers who have that luxury right now. People focus way too much on sales and not the cost of those sales to the company. Just look at Steve & Barry's, 20% plus sales growth had way too high a cost. now they are done.
5. If SHLD was the only stock you could buy for the next year, would you buy it today, or wait?
I would wait until after the next quarters earnings. I think it may become cheaper. If not, oh well, it is still plenty cheap where it is.
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