Amit Chokshi

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  • Retail Discounters: Hope Their Exotic Investments Excel
    Although Lampert has stated he wants to make Kmart and Sears a success from a retailing perspective no investor is in SHLD for the retail story, if one's even possible. The stock's appreciation is baking in expectations that Lampert will turn it into a modern BRK and will use the cash to acquire other businesses, in some cases far outside of the realm of retail. SHLD filed an 8-K about a year and a half ago that basically spelled this out and said that the company's cash would be utilized for investment purposes including controlling stakes in businesses outside of retail. It's basically on Lampert to milk SHLD for as much cash as he can like he did with AZO and Payless and then use any cash flow to invest in other high return businesses.

    Total return swaps are derivatives and the fact that those drove the EPS figures for SHLD speaks to the lack of "earnings quality" regarding the retail operations. Still, going back to the previous point, I don't believe most shareholders are buying SHLD for the retail angle at all. It's as a lot of posters/bloggers/write... have said, SHLD is a public investment fund with one of the better fund managers running it. So you're paying a fair to premium price on a retail comp basis for SHLD which makes it seem odd/overvalued but then you factor in that SHLD in 10-15 years, maybe even 5, won't be predominatly a retailer as opposed to a company with a variety of holdings across industries with Lampert picking the investments. That's not a bad opportunity given that access to a lot of managers with Lampert's ability is limited to investors. There are a ton of great mutual funds run by impressive investors but with SHLD you get a manager with virtually no investment restrictions or redemption issues and other technical issues associated with most mutual funds. BTW, I have no position in SHLD.
    Nov 18 17:36 pm |Rating: 0 0 |Link to Comment |View article

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