ebook essays pieces of the puzzle
Saturday, December 1st, 2012
waiting for santa

How’s that holiday shopping going?  Been to Sears yet?

Sears Holding (SHLD) has done well in the stock market this year, up about 47%, in contrast with the continuing weak results for its business, illustrated in the top panel.

Eddie Lampert’s hedge fund, ESL Partners, has been having an outstanding year.  According to Institutional Investor’s Alpha, ESL has eighty percent of its assets in SHLD and AutoNation (AN) — and the sterling performance of SHLD has been the key driver of the portfolio.

The stock was up 120% in January and February, but has fallen hard the last few weeks.  That’s not good for a lot of hedge funds who may be struggling more than ESL has been, since Alpha says it’s “one of the most widely held stocks among all hedge funds.”

There is still a lot of faith in Lampert, even though he has never been able to do anything to improve SHLD’s business and — despite a flurry here and there — the stock has been a poor performer for the five years shown here.

Expectations are that Lampert can unlock the value in SHLD through some real estate maneuvers, even as the core business falters.  It is also thought that he will continue to shrink the share base, although that really hasn’t happened the last couple of years, as shown in the bottom panel.

While across the bricks-and-mortar divide from Amazon.com, SHLD is much like it, in that it has shareholders who believe fervently in spite of the results that it is posting.  Time will tell, I guess, just as it did when I was kid; I never knew which thing in the Sears catalog I pored over would end up under the tree.  (Chart:  Bloomberg terminal.)