Thursday, August 28, 2008
The Mystery of Sears
Sears Holdings (Nasdaq: SHLD) announced another desultory quarter today (AP: "Sears' 2Q profit drops 62 percent"). No mystery there. The mystery I refer to in the title of this post is what well-respected professional investors such as Bruce Berkowitz see in the company. I've heard the pitch that Eddie Lampert is a great asset allocator, and Sears has great assets in its brands and its real estate, but I don't see it. I have no idea what its brands are worth, but their association with a shabbily run retailer can't be making them more valuable. Whatever the real estate was worth a few years ago, it's certainly worth less now, and, in any case, this would seem to be an inauspicious time to try to monetize it.
Truth be told, I considered buying puts on SHLD when the stock was trading at $80, but my procrastination in filling out the options paperwork at my brokerage prevented me from doing so. At this point, I think I'll continue to hold off. As long as fund managers such as Berkowitz are intent on maintaining Sears as a core holding, that could continue to support the stock. If one of these prominent investors decides to dump Sears though, things could get interesting. There seems to be something of a herd mentality at work here, with one investor's conviction in the company reinforcing another's.
The photos above are of the Sears in Hackensack, and I took them all today. The first one came out much better than I expected, considering the technique I employed, which was simply holding a digital camera out of my open sun roof as I drove toward the building and vaguely aiming it at the Sears tower. Apparently this sort of free-standing Sears building is relatively rare. I believe this one was built in the 1930s.
The second photo was taken using a similar sun roof technique, except that time I was aiming the camera vaguely backward and to the right as I drove past. That photo is of the Sears building's Main Street entrance, which for some reason Sears doesn't use. It's now a bus stop, so the woman in the photo is presumably waiting for a bus.
The third photo is more prosaic, but it gives you an idea of how business is going at Sears Brand Central on a typical weekday afternoon in Hackensack.