Today the Wall Street Journal posted an article outlining some of the technological steps that Sears is taking to improve their retail performance. While I think these programs are good I am still not really optimistic as to their future as a retailer in their current form. I think Sears has tremendously valuable brands and assets which can be monetized over time at a greater value than the current share price.
I believe that the United States is over-saturated with retail, so while Sears might not be performing well, neither are companies such as Radioshack, Best Buy, Circuit City (bankrupt), Blockbuster (bankrupt), Linens & Things (bankrupt), etc. In my opinion it would be foolish for Sears to pile in a lot of their cash flow to expand or spruce up their retail outfit, because the returns on those investments aren't nearly as attractive as some of their other investment options. The stock has had a tremendous run over the last year and utilizing options has made it a successful investment for many of our clients. Because there are so many attractive and profitable companies trading at substantial discounts to our estimation of liquidation value, Sears is no longer one of our top ideas but we expect extreme volatility, which can create tremendous opportunities so the stock is certainly worth following.
Disclosure: I am long SHLD.