Lampert's Sears Holdings Unlocking Some Value

It Looks like Eddie Lampert is unlocking some of Sears Holdings ($SHLD) value. What value? For most onlookers Sears is nothing but a washed up retailer, playing second fiddle to the likes of WalMart ($WMT) and Target ($TGT). But too the value investor their is a different story. For those not familiar with Eddie Lampert, he is the acting CEO of Sears Holdings and a Hedge Fund manager with over 20 years of successful investing experience. When Lampert took hold of Sears via Kmart and merged the two earlier this decade most hailed Lampert as the stock climbed to new heights. But over the last few years in one of the worst economy's since the Great Depression most have grown impatient wondering when and what he will do.

The Value that I was referring to is the DieHard battery brand which is owned by Sears and was exclusively sold only through Sears outlets. However now Sears will start selling DieHard through other retailing outlets (read here). This gives Sears another channel which could equate to more dollars down the line. Remember that Sears holds other brands that could later be sold through other retailers. Brands such as Craftsman tools, Kenmore appliance, and Lands End.

Relevant Articles:

SEARS NOT JUST YOUR AVERAGE RETAILER!?$$$

Billionaire Eddie Lamperts Sears Has More Ideas In-store!

Slicing up Eddie Lamperts Pie!?$$$

Author long SHLD

Mohnish Pabrai Files 13F-HR

Mohnish Pabrai increases holdings from 16 to 20 holdings, unloads MDC Holdings(MDC)  and Jackson Hewitt(JTX)  while adding new positions in  Cresud(CRESY), Goldman Sachs(GS), Horsehead Holdings(ZINC), Leucadia National Corp(LUK), Potash Corp(POT) and Teck Cominco(TCK). Lets hope Pabrai aka The Dhandho Investor  can get back on track after suffering through a terrible 2008. Pabrai has made a name for himself over the last few years after racking up Warren Buffett size returns from 1999 until the market went southbound. Pabrai bases his partnership on The Buffet Partnership of the 1960's. Here is the latest 13F for the Pabrai Funds. 

Be sure and check out Mohnish Pabrai 2008 Year End Letter over at Todd Sullivan's - ValuePlays 

Relevant Articles:

The Dhandho Investor Buys Into Zinc!

Stock Analysis on a small cap: Horsehead Holdings

Ben Graham & The Almighty Dividend

Ben Graham quotes in his book The Intelligent Investor that...  

One of the most persuasive tests of high quality is an uninterrupted record of dividend payments going back over many years. We think that a record of continuous dividend payments for the last 20 years or more is an important plus factor in the company's quality rating. Indeed the defensive investor might be justified in limiting his purchases to those meeting this test.

Certainly with all the major indices in the tank, dividend yields should be greater. This is true but keep in mind that just because a stock pays a dividend does not mean it is a good buy or good investment. However paying a dividend is just another tool and perhaps a very good tool in finding a suitable stock investment.

Where should one start, well their are many financial sites on the web that have this information. A couple  of the easy places to start are Google Finance(GOOG) and Yahoo Finance (YHOO), both have excellent sites for quick and  easy reference. 

Also over at the DividendGrowthInvestor who covers the  subject  of dividend investing, offers a wealth of information.

Graham used the dividend as just one of several criteria for picking stocks.  Why was this? To show that a company was sharing some of the earnings with the stock holders. So often company's will reinvest the earnings back  into the business. In some cases this makes sense, but quite often not.

.....We have  always heard that  "Cash Is King"..... So give me that Dividend Payment Please.

Graham + Greenblatt = The GG Formula

Here are a few stocks that meet some of the characteristics that Ben Graham and Joel Greenblatt might consider, I call it the GG Formula. What is the GG Formula, simply put it is taking both stock picking methods and merging the two. While Graham used book value in his equation the GG Formula does not. I took a different approach by emphasizing Greenblatts Return On Capital(ROC) or Return On Assets(ROA). This may seem odd but I wanted to see how this experiment turned out. I think whether one is using Grahams method or Greenblatts you can still pick winners. One thing that they both emphasize is to buy a basket or handful of stocks, which I think is extremely important for the passive investor. Listed below are a few stocks from different industries that made the GG cut.

mkt/cap p/e roa roe debt earn.yeild

Airvana (AIRV) $390m 4.2 38% 69% 0% 23%

Dawson (DWSN) $156m 4.6 16% 21% 0% 23%

Geophysical

Garmin (GRMN) $4.5b 5.5 28% 38% 0% 18.5%

Nutrisystem $477m 8.4 33% 47% 0% 12%

(NTRI)

Forest Labs $7.9b 8 21% 26% 0% 12%

(FRX)

*What is also interesting is that many of these scanning techniques will sometime overlap

*Author is currently long $NTRI.

A Stock Candidate That Walter Schloss Might Like!

I'm sure many value oriented investors by now are familiar with Mr. Walter Schloss, but for those who are not I will give a quick Bio. Walter started out as a runner on Wall Street back in the 1930's, later he went to work for Benjamin Graham in the Graham-Newman Partnership. By the mid 1950's Schloss left Graham to start his own investment company/partnership. He operated his firm in much the same way as Graham and that other famous student/employee of Graham's Wa

rren Buffet. Over the next 48 years Schloss averaged 15.3% compounded returns .

He had no connections or access to useful information. Practically no one in Wall Street knows him and he is not fed any ideas. He looks up the numbers in the manuals and sends for the annual reports, and that's about it. Adam Smiths Supermoney (1972)

Warren Buffett- famously dubbed Schloss a "superinvestor" is still picking unloved stocks.

Stockmanmarc- Real Pure Value Player

The market will always offer up some undervalued certain securities, but the best time to look for them is when there's panic and fear on Wall Street, Schloss often said. Buffett often quotes the same. Great minds think alike.

Schloss like to used the KISS method.

SCHLOSS WILL FOCUS ON:

• Stocks with little or NO debt.
  
• Stocks with a track record or long history.
  
• Stocks selling NEAR or BELOW Book Value.
  
• Stocks/Companies with management in place and owing a substantial amout.
  
• And Don't loose money.
  

Here is a company listed below that Schloss or any value investor might take a look at:

Thor Industries (THO) was founded in 1980 and have grown to be the largest manufacturer of Recreation Vehicles (“RVs”) and a major manufacturer of commercial buses in North America. Their market share in the travel trailer and fifth wheel segment of the industry (towables), is approximately 30%. In the motorized segment of the industry they have a market share of approximately 16%. Their market share in small and mid-size buses is approximately 37%. Thor also manufactures and sells 40-foot buses at their facility in Southern California designed for that product as well as their existing 30-foot and 35-foot buses.They rely on internally generated cash flows from operations to finance their growth although they may borrow to make an acquisition if they believe the incremental cash flows will provide for rapid payback. They have invested significant capital to modernize, improve and expand their plant facilities and expended $14,815 for that purpose in fiscal year 2008. Currently Thor Industries (THO) trades slightly above book value, while sporting a very low price to sales multiple of .32. Thor has zero debt and management has very valued interest. Management has maintained a very steady free cash flow for the last ten years, however it has tapered off over the last year but has maintained positive.

By the numbers:

• $178mil cash/NO Debt
  
• 29 year company history
  
• trading at just above book value
  
• insiders hold 46% shares
• trading at 5 x EV/EBITDA
  
• current ratio is 2.3
  
• price/sales ratio of .32
  

* With the current state of the economy Thor could suffer further down side however with their longterm record and a close eye on their bottom line Thor deserves a further look.

* Author is currently long THO