Slicing up Eddie Lamperts Pie!?$$$

I thought this might be a good time for an up date on Sears Holdings $SHLD considering they just released earnings yesterday of $2.94 excl items vs. estimate of $2.68. While the economy sank deeper into a recession Sears held up fairly well. However many financial media pundits talk otherwise. To the ones that are new to this story let me catch you up. Mr. Edward Lampert who is the Chairman of Sears Holdings runs a Hedge Fund- ESL Investments. The Hedge Fund or ESL has 16 stocks in its portfolio totaling over 7 billion with SHLD and AutoZone $AZO making up the lions share at 75%. Lampert bought into Kmart in 2003 and Sears in 2005 and merged the two companies. The company had success coming out of the box with the stock fetching as much as $195 a share. This was due to many investors thinking Lampert would sell off part of its large real estate holdings. This has not occurred and we all know what the economy has done over the last year and a half- tanked. Many investors jumped aboard this stock solely due to its real estate, that's fine but since the stock has gone south many bailed and seem to think Sears better days are behind them. As a retailer this may be true but as a potential Investment Holding company I think otherwise. Many large profiled investment companies have been in and (out) of this stock. Two of the larger players that have their funds money invested are the Fairholme Fund run by Bruce Berkowitz and the Third Avenue Fund fund run by the veteran Marty Whitman. With the economy in tough times this company along with the majority of others will take time to pay off or will it PAY off? Lampert states in his current news letter:

Sears will continue to evaluate opportunities based upon our expectations for returns and continue to experiment with a variety of options where the returns could justify higher levels of investment...

• Taking this approach a step further this month with plans to close its Joliet, Ill., Kmart store and transform it into MyGofer, a store where buyers can pick up their online orders. An estimated 80% of the facility will be dedicated to merchandise storage; 20% will be allotted for showroom space.
• The public launch of ServiceLive earlier this month is another example of how we are creating relationships with customers that empower them to manage their lives. ServiceLive.com is an online marketplace where homeowners and businesses can name their price for a wide variety of services, improvements and repairs.
  
• The company said Kmart, which has benefited from increased layaway sales to cost-conscious shoppers, increased its adjusted earnings before interest and taxes from the prior year.
• Reduced short-term borrowings on its $4 billion revolving credit line to $435 million as of January 31 from $1.9 billion at November 1, 2008.
• Plans to close 24 stores in addition to the eight already announced.
• Repurchased 2.9 million shares for $120 million and debt securities for $29 million during the fourth quarter
• Maintained strong balance sheet and liquidity position
• Cash balance of $1.3bil as of January 31st 2009 vs. $1.6bil February 2nd 2008
• Kmart began operating its own footwear business on January 1, 2009, which had previously been operated by a third party
  

Heres what Mr. Lampert had to say in a letter to shareholders

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Stocks ended lower for the week with a global sell off. Once again the herd ran for the doors not wanting anything to do with stocks. Fear has set in and no telling when good times will return. But for the intelligent investor these are good times. This is when that simple saying comes into play "Buy Low and Sell High". Are we even at the low, who knows? Stocks have been routed across the board. Will we go lower??? Next week will show more of the puzzle.

The intelligent investor views this mess, crisis, or recession as an opportunity to by good companies at a good price. Where many investors are selling out, waiting for the storm to subside. I have got news for you, when the storm settles, chances are the market will be higher,then it will be to late.I hear plenty of people say I'll wait until we turn back up before jumping back end. That's when you miss the chance of making the big returns that Warren Buffet, Eddie Lampert, and Marty Whitman have made for themselves and their shareholders for years.

Your thoughts?


STOCKMANMARC