Sears Holdings: A Chart That Will Surprise You

Here is a chart of four stocks.....I'll bet the results will surprise you..

Click to enlarge
Surprised? Would anyone have bet shareholders of Google (GOOG), Research in Motion (RIMM) and Apple (AAPL) are essentially in the same boat in the past year as shareholders of Sears Holdings (SHLD)? Or, based on the love affair or lack thereof with its products, is our outlook of the various stocks skewed?

One is a struggling retailer about to kick short sellers in the face and the others are tech companies that sell products we all love. The problem with them is the same old story. Investors bought shares of them at 30-50 times earnings (or higher) assuming the explosive growth they were experiencing would go on forever. The growth subsided, shares plummeted and investors got squashed.

Are they cheap now? One could argue they are reasonable, although the same person might wonder how many $200-$400 phones people may buy in a recession or how much money companies are going to put into advertising during one. If they won't, prices could fall further. I don't know either way but I do know I would feel more comfortable owning then at 12-17 times earnings they trade at now than the ridiculous levels earlier this year.

Do people love their products still? Yes. Are they still very profitable? Yes. Is overpaying for unsustainable growth a recipe for losses? Yes.

Disclosure: Long SHLD

Comments

[adamcz:]

You'll have to let me know when Apple's growth subsided. Guess I missed it.

2008 Dec 04 07:33 AM

[adamcz:]

You'll have to let me know when Apple's growth subsided. Guess I missed it.

2008 Dec 04 07:33 AM

[Swiss Investor:]

Mr. Sullivan, I'd like to remind you that you were bullish on SHLD when the stock was at its very heighs. I don't think that anyone should listen to your comments on this stock anymore.

2008 Dec 04 09:06 AM

[investor88:]

Someone said buy a stock only when it is going up. Logical enough but as hard to do as the obvious "buy low sell high" wisdom.

Another strategy people laugh at is momentum trading, but again the logic is good.

My point basically is that we can use any logical strategy provided it is well executed and suited to the risk appetite of the individual.

2008 Dec 04 09:51 AM

[Jim Not C:]

Last hand played.

Everybody's gone home; dishes are done; card tables put away, and the lights are off. Good night.

2008 Dec 04 12:00 PM

[WhynoT:]

Wow, you my friend the author are a seriously delusional about your long SHLD position. No word about the ridiculous yield on their debt or the overvalued aspects of the retail property.

Lets see you were promoting SHLD in march 08... Nov 07....Jul 07... WOW You must have lost a whole boat load of money... waiting to get back to par eh. Good luck, I'll be buying puts the whole way down.

2008 Dec 04 02:06 PM