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.

4 comments:

ravinsu said...

Nice pics Dave, but I think you should stop and take pictures, rather than losing your focus on driving.

DaveinHackensack said...

Thanks, Ravinsu. I was driving fairly slowly when I took these, but point taken. BTW, if you haven't yet, click on the first photo to expand it. Interesting how the colors in the concrete of the building seem to blend with the colors in the clouds.

doofus said...

LOL. Do you ever get out of your car?

Great post on Sears. I have often wondered the same thing about Sears myself. Consumer reviews of some of their key brands, and especially service (which used to be stellar) have been really bad.

DaveinHackensack said...

Doofus,

Unfortunately, Hackensack has a main street that's too narrow for its traffic, so it would have been a pain to parallel park there just to snap the photo.