Bill Parcells had a great quote that has always stuck with me. He was asked about his team (that at the time was 2-6 but had lost some close games) whether or not he felt the team was better than its record. His reply, "You are what you are". If you are 2-6 that is what you are, nothing more and nothing less.
Here is a recent article on Sears Holdings (SHLD) that is worth reading.
Why do I bring up Parcells? Well, his quote has a lot to do with current perceptions of Sears.
Sears, is currently a struggling retailer. It should be noted that this is not a situation currently held only by Sears. Retailers, expect Wal-Mart (WMT) and Target (TGT) all are in the same situation. Lampert is 100% correct when he says "We’re the $50 billion company that people think doesn’t have any customers or relevance,”. It is true... Sears is by no means anywhere near "in trouble". Cash is great, debt is insignificant and the balance sheet is pristine for a retailer in the current environment.
All that, however does not comfort many shareholders who have watched the stock fall 50% in the past year. Again, a 50% drop is a number held by scores of other retailers (JC Penny (JCP) and Macy's (M) for starters) but again, it is what it is, lousy.
Back to football...
Had you been a person who bet on football in 1995 and watched the Patriots that year (the year Parcells made the quote), you would have seen a team with a strong leader that made some mistakes that had caused it to lose some games it otherwise would have won. The team had a good young quarterback, strong defense ,capable receivers and a good kicker (not to mention great coaching). In short, all the ingredients were there for success. A misstep here and there caused poor results.
One could perhaps see the "value" in the team and recognized that a little tweaking could result in a dramatically different outcome the following year.
Had you gone to Vegas that off-season recognizing all this and bet the Patriots would have made the Playoffs and / or the Super Bowl the next year, the odds you would have got were wonderful. When they actually made both the following season, you would have laughed all the way to the bank. Parcells, recognizing the shortcomings in the team, made some changes but stuck to his core philosophy that worked in the past, resulting in success.
Applying to Sears:
See the similarities? Lampert has acknowledged some mistakes and is trying to take steps to correct them. A new CEO, new structure to maximize brand value and and a new leader for those brands are in the works. What has not changed is the core strategy of patience and disciplined capital expenditures. That strategy has made early shareholders very wealthy, even after the recent stock slide, and is a proven long term one.
Those who think Sears is on the brink of extinction are like the football fans who have a 5-5 team and say they've "been lucky and should be 2-8", well, Sears isn't, it is 5-5. Conversely, the retail environment will not turn anytime soon so the same 5-5 team cannot be said "should be 7-3 because it has been unlucky" (in this case the "bad luck" is the economy), it is 5-5.
What one can do is look forward and see a very smart leader, correcting errors, with a very strong core (balance sheet) and a proven track record. Based on that you could say the current situation is not reflective of the future results one should anticipate.
Hence, value investing in Sears...
Disclosure: Long SHLD, WMT
Value Investing in Sears: Avoid Current Perceptions & Look Forward 64 comments
June 26, 2008
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This article has 64 comments:
and then again - sears is a faltering, aged former behemoth - not comparable to a young, hungry, talented team. No Eddie Lampert in the world can change that. Others see great value - very respected value fund managers among them. I can't. I prefer investments where there is less hope and beliefs involved
While I have a tremendous amount of respect for Lampert, he has a huge task in front of him that so far he has been either unwilling or unable to tackle. In my opinion, the whole corporate philosophy of the company needs to change to become more nimble and responsive to changes in the retail environment. He will only be able to ride the cash flow off aging, unattractive, understocked stores for so long, before losing what remaining market share they have left.
Also what are the holdings in Sears.
There were just numbers but not itemised on the investments.
This was one of many reasons why I sold the stock, no idea on what the company was doing with the cash except the buying back of the stock.
Lampert is a financier and a hedge fund manager. he either did not manage to hire a competent retail team, or perhaps it's just too hard to compete with Wal Mart, Costco and Target. sure, Sears' balance sheet looks nice, and that will certainly help them in a recession.
but, if Lampert is really serious about having Sears make it as a retailer, then he doing things wrong. earlier on, I would have said I have no choice but to believe that Lampert was serious about Sears the retailer, as he hadn't made any moves to monetize the brands or the real estate. now, he might be moving in that direction, at least with the brands. but I think there are a lot of better investment opportunities than Sears.
He makes his money and fees with ESL,over a billion dollars one year.It is there where he is focused on investing not Sears.
He is buying AutoNation in ESL not in Sears.etc.
As far as a realestate at least reits pay a dividend while you wait.
Must be some elite for sure cause I know no one going there.
Again Lampert was making money in the market when everyone was making money in the market now that it is more difficult he is not.
As far as the returns well obviously, if you were up one year 100 percent and do nothing for the next four years your return is 25 percent this is good in a bad market and it makes makes you look great.
Finally that return on Sears when they merged was from the speculation of Lampert using Sears as an investment vihicle and investors were able to get in without an enourmous investment and being part of Lampert's hedge fund.
That blew over and the shares tanked.Investors realizing Lampert wants to prove somethng to himseld that he is a retail guru.
Listen look at the facts,he screwed up and not putting out a plan is because he is scared of failure which is in process now.
In other words ROI.
Please facts not day dreaming and hoping because it's Lampert, he is a billionaire he sleeps well at night.
The love bird Cramer even says to sell and he is not confident with his buddy pal.
"LOSE MONEY" WITH JIM CRAMER
LOL
As for football analogies, give it a rest! There is nothing in this country more self indulgent and focused than professional sports. I stopped watching and going to pro sports events, years ago. They are nothing more than a bunch of spoiled and overgrown kids being exploited by avaricious franchise owners, greedy coaches, classless advertisers, intellectually challenged TV and Cable networks, and very poor representation of American sports. They spoil every thing they touch.
Gee, it sounds like Wall Street and Washington.
1985 - Japanese investors are buying all the real estate
1998 - The Internet has changed the fundamentals of business
2005 - Do whatever it takes to buy a home now because real estate prices will never drop again
2008 - Gas will never be plentiful again
Isn't it interesting when the economy goes down everyone assumes that discount stores will be the only place anyone will ever shop again?
seriously don't buy SHLD if you won it sell. The guy who wrote this article was fired shortly afterwards for even mentioning SHLD
In other words what good will it do you today or for your future.
"LOSE MONEY" WITH JIM CRAMER
GOOGLE FINANCE 7.2.08
No need to repeat my previous posts.
Google Finance
Although Lamperts focus is on ESL in which he recieves the fees and makes his money.
Some of the posts which were detailed in full were removed,,,I wonder why,,is it the truth hurts.
Well if you want to buy because it's Lampert go ahead but obviously there is no plan or a plan that is working.
The real estate ok,,,but at leasts reits pay a dividend while you wait.
LOL
What good are the sales when you are posting losses?
You don't talk too much now do you.
Lampert is worring about the footaball.
Buy GE you won't regret it.
Nice dividend.
Tuesday, January 29th, 2008
From the article: “Speaking by phone from the company’s Hoffman Estates, Ill., headquarters, Mr. Lampert bristled at critics who lost faith in Sears as its share price fell from $195 in April 2007 to about $104 now. Sears Holdings was formed in 2005 when Kmart Corp. merged with Sears, Roebuck & Co. and took the Sears name. The stock’s performance since Kmart emerged from bankruptcy in May 2003 is a healthy 900% gain. “Instead of [the share price] being up 20 times since we took control of Kmart in 2003, it’s up 10 times. The decline from our highs is in line with other department store retailers.”
We have already mentioned how Sears decline is inline with other retailers regardles of sales performance.
Sunday, June 22nd, 2008
It looks like they want to compete with peapod.com. With $4/gallon gas, more shoppers may look into delivery services. I was unable to find any major media announcements or press releases on the service.
Check out the site: mygofer.com
Friday, June 13th, 2008
From the article: “Find a theme and export it: Ackman says he invested in Sears and Sears Canada because the retailing companies financed their credit-card receivables on its own balance sheet, which wasn’t well-understood by the markets. He used the same kind of thinking to tackle Target, which he believed was strong company with a solid debt profile and also one of the only retailers to still finance its credit cards in-house.In the case of Sears, Ackman evaluated it as its component parts, including Sears Hardware, Home Services, Sears Canada, Land’s End and Sears Mexico, all of that is before you get to the company’s extensive real estate value. “The only thing wrong is the stock price,” he said, a line that drew laughs, because Ackman acknowledged later, it bore a similarity to the old joke about “other than that, how was the show, Mrs. Lincoln.”
Buffet does not own one share of Sears stock as well as many other value fund mangers.
Lampert was buying Citigroup as well as Sears stock at its highs.
Whoops.....LOL.
Simply speechless.
Well maybe Todd is smarter than him.
Just a reminder Cramer said to buy $180.
"LOSE MONEY" STARRING JIM CRAMER
Todd I was reading an earlier post you wrote in October,,where you were giving an expanation of comparing BRK and Buffett to Sears and Lampert.LOL
You made it sound like it was foolish to sell at around $130.
Need I say more.........LOL
Licking your wounds.
LOL
Congratulations Sears.
Oh- but keep buying because it's Lampert.
What can he possibly say or do that will help Sears.
Keep holding on and maybe in 30 years the real estate value will help you but you have not received any dividend waiting.
LOL,LOL,LOL,LOL,LOL,LO...