Sears: Too Cheap to Resist

Did you hear the one about the $21 billion retailer that grew profits 83% in one year? Their stock went down 6% following that report! Ha ha ha, that's a good one!

Aside from providing further proof that the whole market is on crack, what is going on here? Apparently Sears Holdings Corp. (SHLD) has this wacky idea that, since they took the stock from $30 to $140 since Uncle Eddie bought Kmart, maybe they should buy something else.

The company added $1.5Bn in cash to bring cash reserves up to $3.7Bn and has added $6Bn to inventory since last year (big sale coming I bet). So we have $4Bn in cash, $9Bn in inventory, one of the world's top 10 brands and 3,900 or North America's best retail locations (almost all fully paid for and unmortgaged) all for $21Bn.

So, if we deduct the cash and cut the inventory value in HALF, we have 3,900 stores that each generate an average of $300,000 a year in profits and are being valued less than $3M per store.

Who is selling this thing???

I'm not going to be a hero but I will be looking for an entry opportunity before this breaks the 50 dma at $147 but I will be very surprised if it sells all the way down to the 200 dma at $135.

SHLD 1-yr chart:

Comments

[NO DooDahs:]

SHLD looks like a technical short to me. Not a setup I like, though.

ADM is a swing-trader's stock right now. Check the chart with a slow stochastic. You be long it at the open on Monday - trail stop of 1.25 or so. It'll stop out in a week or so ...

2006 Aug 18 05:45 PM