Sears Holdings (SHLD) Chairman Edward Lampert added another 1 million AutoNation (AN) shares this week at between $16.25 and $16.50 a share.
Lampert now controls 68.369 million shares or 38.2% of the outstanding total.
Disclosure (“none” means no position):None
With the news that Target (TGT) has agreed to sell $3.6 billion worth of credit card receivables to JP Morgan (JPM), one cannot help but notice he has made not a single demand from Edward Lampert at Sears holdings (SHLD). This would be the only investment in memory he has taken such a stance.
Ackman was at Sears’ annual meeting yesterday and did ask a few benign questions. According to Ackman, his 5 million share investment in Sears “is due to Eddie Lampert”.
Now some will say that Ackman has bee quiet because “he knows Lampert” or some such foolishness. Let’s be honest, you do not invest over $500 million and keep quiet if you think things are not being done properly. Last time I checked, Ackman was loath to not speak up when he thought management was not doing the proper things.
Now, some out there have claimed Lampert’s statement yesterday that Sears was “cutting costs” means he “took the late train”. The assumption must be that because he only talks to folks maybe 4 times a year that when he says something it only happens from that point on? It has not been an ongoing effort? This is just disingenuous at best and totally dishonest at worst. These are the same folks that have complained for the past two years that Lampert has “cut costs too much” at Sears and the retailer has suffered because of it. Let’s get the story straight folks. Which is it? Is he late cutting costs or has he cut them too much?
Now let’s look at it. Other retailers like JC Penny (JCP) and Macy’s (M) are taking on additional debt to get through the current environment. Target (TGT) is shedding valuable assets. Only Wal-Mart (WMT) is thriving. Sears, suffering like the rest of the industry is actually repurchasing stock and paying off debt, improving an already industry best balance sheet.
In short, Lampert is acting like a guy who is in this thing for the next few decades, not quarters.
Disclosure (“none” means no position):Long SHLD, WMT, none
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Sears Holdings (SHLD) Chairman Edward Lampert continued his buying of AutoNation (AN) shares adding an additional 400,000 shares on 4/30 at prices just under $16
He now controls 67.749 million shares or 37.9% of the total outstanding
Disclosure (“none” means no position):None
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A quick read of the headlines would lead one the believe the recent credit line non-renewal between Sears Holdings (SHLD) and Bank of America (BAC) is ominous for the retailer. To the contrary, it is an example of a well capitalized company telling a bank to take a hike.
Background (from the SEC filing by Sears):
“On April 14, 2008, Bank of America, N.A., as Issuing Bank under the Letter of Credit Agreement dated as of August 13, 2004, as amended (the “LC Agreement”), among Sears Holdings Corporation, Sears Roebuck Acceptance Corp., Sears, Roebuck and Co. and Kmart Corporation and Bank of America, N.A., advised us that it would not agree to renew the LC Agreement under its existing terms. The current term of the LC Agreement, which is a 364-day secured facility with a commitment amount of up to $1.0 billion, is scheduled to end in July 2008. At April 18, 2008, only $1.6 million in letters of credit were outstanding under the LC Agreement, which provides solely for the issuance of letters of credit and does not provide for direct borrowings. Substantially all of our outstanding letters of credit are issued under our $4.0 billion, five-year revolving credit facility (expiring March 2010), which has a $1.5 billion letter of credit sublimit (the “$4 Billion Revolver”).
We have maintained the LC Agreement as a facility to enable the Company to cost-effectively issue letters of credit when surplus cash is available to collateralize the letters of credit. As we are now using our other facility (the $4.0 Billion Revolver) for substantially all our letter of credit needs, the termination of the LC Agreement is not expected to have any effect on Sears Holdings’ liquidity.
No early termination penalties or fees would be incurred by us if the LC Agreement were to terminate at the end of the current term. We are evaluating whether or not we will replace the LC Agreement at this time.”
So we have a $1 billion credit line that has only $1.6 million outstanding on it and a $4 billion revolving credit in place.
The real story is here than Bank of America is looking to squeeze every penny out of every loan they can to offset mortgage related losses. It is important to note that BAC never said they would NOT renew it, they just got greedy (or desperate). Since Sears has a fantastic balance sheet and another $4 billion credit of out there, they politely told BAC where to go.
Not renewing a credit line that is not even being used is hardly a the big deal that is being made of it out there.
Disclosure (“none” means no position):Long SHLD, None
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The latest pondering out there has the proposed Circuit City (CC) and Blockbuster (BBI) the equivalent to the merger of Sears and Kmart that created Sears Holdings (SHLD). While a nice exercise, it lacks one thing, legitimacy.
For the best analysis of the exercise, read here:
Here is were is falls apart and it does so before it actually get started really. Sears and Kmart did the same thing, retail. Specifically clothing, lawn and garden, electronics, auto and the rest of the big box general retailer gambit. The combination of the two created the nation’s third largest retailer with sales of over $50 billion a year. The combination of BBI and CC will do nothing to increase the size of either in their prospective industries.
Blockbuster rents dvd’s and Circuit City sells them it their stores. They also both…..well…..they don’t do anything else in common. Other that the fact they both have dvd’s in their stores, the two businesses have no similarities at all, other than poor management.
A Circuit City and RadioShack (RSH) merger would be a similar comparison to Sears / Kmart as those businesses are very similar. There would be, in that case, cost savings involved with the merger that could be realized and the two businesses would have selling synergies that could boost results. Also there is the little reality that RadioShack’s Julian Day could out-manage CC’s Phil Schoonver in a coma.
One also has to remember the Sears / Kmart merger has produced a 10 fold increase in shareholder value, does anyone out there actually think a Circuit City / Blockbuster one will produce even remotely similar results? Anyone? Does anyone actually think they will be even profitable considering the debt load necessary to pull off the deal?
Other than the fact that both situations involved two companies merging, there are virtually no other similarities.
Disclosure (“none” means no position):Long SHLD, none
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Barrons has a piece on Lampert and his recent Autozone (AZO) purchases.
Below is the Barron’s article:
WITH AUTOZONE ON THE REBOUND, Edward Lampert — its biggest shareholder — spent $94 million to top off his stake in the auto-parts retailer.
On Tuesday Lampert, well-known hedge-fund manager and chairman of Sears Holdings, disclosed that he now owns 22.9 million shares, or a 36.2% stake in the Memphis, Tenn.-based company. The billionaire investor purchased 807,442 shares from April 8 through April 15 for $94 million, an average of $116.04 a share. Lampert last reported owning 22 million shares, or a 31% stake in AutoZone, at the end of the fourth quarter.
The purchases were made indirectly through Lampert’s investment vehicle ESL Investments and other subsidiaries. They were reported to the Securities and Exchange Commission in a 13D filing for active shareholders, although the documents said that the shares were obtained for investment purposes.
Neither Greenwich, Conn.-based ESL Investments nor AutoZone returned phone calls seeking comment on the purchases.
“In the end the most impressive thing about these transactions is that they’re adding onto a large position which ESL has smartly kept for years now,” says Jonathan Moreland, adviser to Ladenburg Thalmann Asset Management on insider strategies.
“This has been a huge home run for Lampert, who held onto the accumulation that he undertook when the stock was trading in the mid-$20s in 2001,” he says. “And for him to be topping up his investment — and despite the large dollar value, for him it really is just topping up — makes it more impressive.”
AutoZone shares dipped to a 52-week intraday low of $103.07 on Jan. 22. The stock has since recovered, gaining $1.13 to $122.49 on Friday.
AutoZone lost 8% in the last 12 months, while peers tracked by the Dow Jones Specialty Retail Index fell 18.5%. However, their fortunes diverged since the beginning of the year, with AutoZone rising 1.2% and the Index falling 6.3%.
“Any stock that is [exposed] to consumers paring back has traded down,” says Moreland. “Obviously Lampert has a very long-term view, and the stock is in a long term uptrend. The market is acting as if we’re closer to the end of the turmoil and stocks that were beaten down by that issue are starting to trade up. No one can say we’re absolutely out of the woods, but the smarter money is leaning long and AutoZone is a perfectly decent insider-generated candidate for investors looking to play the longer term bet that the turmoil is over.”
The Street may not be as sanguine as Lampert. Analysts polled by Thomson Financial on average rate the stock at Hold or the equivalent, with a 12-month target price of $130.20.
AutoZone currently has a Thomson Insider Rating of 7 (on a 10-point scale, with 10 being the most bullish), as compared with the Retail Goods industry average of 5.
Joshua Hong, director of research for OwnershipAnalyzer.com, wrote in an email to Barron’s Online that while Lampert’s purchase was positive, other institutional ownership data was neutral.
Disclosure (“none” means no position):None
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Barrons has a piece on Lampert and his recent Autozone (AZO) purchases.
Below is the Barron’s article:
WITH AUTOZONE ON THE REBOUND, Edward Lampert — its biggest shareholder — spent $94 million to top off his stake in the auto-parts retailer.
On Tuesday Lampert, well-known hedge-fund manager and chairman of Sears Holdings, disclosed that he now owns 22.9 million shares, or a 36.2% stake in the Memphis, Tenn.-based company. The billionaire investor purchased 807,442 shares from April 8 through April 15 for $94 million, an average of $116.04 a share. Lampert last reported owning 22 million shares, or a 31% stake in AutoZone, at the end of the fourth quarter.
The purchases were made indirectly through Lampert’s investment vehicle ESL Investments and other subsidiaries. They were reported to the Securities and Exchange Commission in a 13D filing for active shareholders, although the documents said that the shares were obtained for investment purposes.
Neither Greenwich, Conn.-based ESL Investments nor AutoZone returned phone calls seeking comment on the purchases.
“In the end the most impressive thing about these transactions is that they’re adding onto a large position which ESL has smartly kept for years now,” says Jonathan Moreland, adviser to Ladenburg Thalmann Asset Management on insider strategies.
“This has been a huge home run for Lampert, who held onto the accumulation that he undertook when the stock was trading in the mid-$20s in 2001,” he says. “And for him to be topping up his investment — and despite the large dollar value, for him it really is just topping up — makes it more impressive.”
AutoZone shares dipped to a 52-week intraday low of $103.07 on Jan. 22. The stock has since recovered, gaining $1.13 to $122.49 on Friday.
AutoZone lost 8% in the last 12 months, while peers tracked by the Dow Jones Specialty Retail Index fell 18.5%. However, their fortunes diverged since the beginning of the year, with AutoZone rising 1.2% and the Index falling 6.3%.
“Any stock that is [exposed] to consumers paring back has traded down,” says Moreland. “Obviously Lampert has a very long-term view, and the stock is in a long term uptrend. The market is acting as if we’re closer to the end of the turmoil and stocks that were beaten down by that issue are starting to trade up. No one can say we’re absolutely out of the woods, but the smarter money is leaning long and AutoZone is a perfectly decent insider-generated candidate for investors looking to play the longer term bet that the turmoil is over.”
The Street may not be as sanguine as Lampert. Analysts polled by Thomson Financial on average rate the stock at Hold or the equivalent, with a 12-month target price of $130.20.
AutoZone currently has a Thomson Insider Rating of 7 (on a 10-point scale, with 10 being the most bullish), as compared with the Retail Goods industry average of 5.
Joshua Hong, director of research for OwnershipAnalyzer.com, wrote in an email to Barron’s Online that while Lampert’s purchase was positive, other institutional ownership data was neutral.
Disclosure (“none” means no position):None
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The race for your rebate check is on for retailers and it looks as though Sears may have taken the lead from Wal-Mart for now.
Back in January, Wal-Mart WMT) announced their plan to help consumers spend their upcoming rebate checks from the government.
Today Sears Holdings (SHLD) announced its plan and it is better for the consumer.
Sears will:
“When customers bring their stimulus checks to a Sears or Kmart cash register, they can convert the amount of the check into gift cards, plus receive a bonus gift card worth an additional 10 percent. To be eligible, the amount of gift cards purchased must be equal to the full value of the stimulus check. The gift cards can be redeemed at any Sears, Kmart or Lands’ End retail stores or online at sears.com or landsend.com. The promotion is scheduled to last from May 14 to July 19, 2008.”
“Even with a weak economic outlook, a recent survey conducted by Sears suggests that Americans still want to make small changes in their homes. While nearly all respondents agreed that in the current economy it is more important than ever to get the best value for your money, three out of five people said that despite financial concerns, they are still investing in small home improvements that can make a difference.”
“Beginning May 1, customers can learn more about this offer in stores, as well as in Sears Holdings’ circulars, online, targeted emails and direct mail pieces. The gift cards and bonus cards have no expiration and no fees.”
Like Wal-Mart’s plan the card can be used for groceries at Kmart and with the additional of Sears, the spectrum of quality lawn and garden tools and clothing is multiples of Wal-Mart’s offerings.
Let’s not forget the 10% kicker for consumers also. The significance of that cannot be understated. I will get $2100 back in my check, if needed a new washer or dryer, my total Sears card would be for $2310, bonus included. That is a nice chunk of change and would lead me there to get them without question.
Wal-Mart got the jump on retailers in January but Sears today took that and raised the bar a notch. One has to wonder why the silence from Target (TGT), JC Penny (JCP) and other retailers as the date approaches. Even though they were first out of the gate, it is possible that Wal-Mart was just a little too early with their announcement as the checks will not begin to roll off the presses for another month.
I also do not think Wal-Mart will not have some sort of answer….they will.
Disclosure (“none” means no position):Long SHLD,WMT, None
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In a just released SEC filing Sears Holdings (SHLD) Chairman Eddie Lampert disclosed through his RBS and ESL hedge funds he has increased his AutoZone (AZO) holdings to 22.669 million shares. This is up from 22.2 million just last week. The purchases were made 4/9 and 4/10 at about $116 a share.
Lampert now holds 36% of the total outstanding
Disclosure (“none” means no position):Long SHLD, None
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In an SEC filing moments ago, Sears Holdings (SHLD) Chairman Eddie Lampert disclosed he purchased an additional 239,000 shares of AutoZone at prices of $113 to $116 a share between 4/8 and 4/9.
Lampert and affiliates now own 22.3 million shares or 36% of the total
Disclosure (“none” means no position):None
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Even I missed this one until alerted by a reader…..
Footstar Inc. (OTC:FTAR) is selling its footwear license to Sears Holdings (SHLD) for $13 million in preparation for winding down its business at the end of the year. Footstar agreed to sell substantially all of its intellectual property to Sears, including the intellectual property related to Sears’ Kmart business.
Footstar operates roughly 1,300 licensed footwear departments at Kmart under a contract set to expire at the end of 2008. They also operate licensed footwear departments in 859 Rite Aid Corporation stores located on the West Coast. Brands under Footstar’s operations include Thom McAn, Cobbie Cuddlers and Texas Steer — which are company owned — and Route 66 and Basic Editions. Kmart-licensed footwear departments account for substantially all of its $630 million in sales and $53 million operating profit. Kmart has begun to hire several employees from Footstar and has promised employment to almost all current management.
So, for $13 million Lampert has saved Sears essentially $53 million annually (the profits Footstar received from Kmart). Not a bad return….
Disclosure (“none” means no position):Long SHLD
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Even I missed this one until alerted by a reader…..
Footstar Inc. (OTC:FTAR) is selling its footwear license to Sears Holdings (SHLD) for $13 million in preparation for winding down its business at the end of the year. Footstar agreed to sell substantially all of its intellectual property to Sears, including the intellectual property related to Sears’ Kmart business.
Footstar operates roughly 1,300 licensed footwear departments at Kmart under a contract set to expire at the end of 2008. They also operate licensed footwear departments in 859 Rite Aid Corporation stores located on the West Coast. Brands under Footstar’s operations include Thom McAn, Cobbie Cuddlers and Texas Steer — which are company owned — and Route 66 and Basic Editions. Kmart-licensed footwear departments account for substantially all of its $630 million in sales and $53 million operating profit. Kmart has begun to hire several employees from Footstar and has promised employment to almost all current management.
So, for $13 million Lampert has saved Sears essentially $53 million annually (the profits Footstar received from Kmart). Not a bad return….
Disclosure (“none” means no position):Long SHLD
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Here it is. This years shareholder meeting details for Sears Holdings (SHLD)
Dear Stockholder:
I am pleased to invite you to attend the annual meeting of stockholders of Sears Holdings Corporation (the “Company” or “Sears Holdings”) on Monday, May 5, 2008. The meeting will begin at 9:00 a.m. (Central time) in the Sears Holdings General Session Room, 3333 Beverly Road, Hoffman Estates, Illinois.
The notice of Annual Meeting and proxy statement that follow this letter describe the matters to be voted on during the meeting. Your proxy card and the Company’s 2007 Annual Report on Form 10-K also are enclosed.
Whether or not you plan to attend the meeting in person, please read the proxy statement and vote your shares. Instructions for Internet and telephone voting are attached to your proxy card. If you prefer, you can vote by mail by completing your proxy card and returning it in the enclosed postage-paid envelope.
If you plan to attend the meeting:
If you are a stockholder of record and you plan to attend the meeting, please keep the admission ticket that is attached to the enclosed proxy card, as you must present this ticket to be admitted to the meeting. Each stockholder may be asked to present valid picture identification, such as a driver’s license or passport. Stockholders holding shares in brokerage accounts (“street-name stockholders”) will need to bring a copy of a brokerage statement, proxy or letter from the broker confirming ownership of Sears Holdings shares as of the record date of March 10, 2008. Registration will begin at 8:30 a.m. and seating will begin at 8:45 a.m. Cameras, recording devices and other electronic devices will not be permitted at the meeting.
Sincerely,
W. Bruce Johnson
An interesting note from the proxy. Directors and Senior Execs own 55.3% of the company.
There were 132,356,535 shares of common stock outstanding as of February 2, 2008
Disclosure (“none” means no position):Long SHLD
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Long weekend so here is the list a day early…visit Value Investing News for more.
1. Betting Big, Winning Big: Interview With Bruce Berkowitz
(via online.barrons.com)
Barron’s: You run a very concentrated portfolio, with the top 10 holdings of the Fairholme Fund accounting for roughly 70% of the assets. Why is that?
2. Gannon On Investing: On Ignorance Admitted
(via www.gannononinvesting.com)
How well defined is your circle of competence? How honest are you with yourself? Join Geoff as he discusses these topics and current market environment.
3. Bruce Berkowitz on Sears Holdings (Video)
(via www.bloomberg.com)
4. How value investor Chou wins with bonds
(via www.theglobeandmail.com)
Mr. Francis Chou’s method can be boiled down to a few principles. As he wrote in his 2007 report to unitholders, “the cardinal principle of investing is to think first about preserving capital before thinking about making money. The greater the probability of permanent loss of capital, the greater the spread should be between a particular debt instrument and risk-free treasuries.”
5. Does the magic formula work?
(via www.contrarianvalueinvesting.com)
Ever since its release, much has been written whether or not Joel Greenblatt’s “Magic Formula” works. Joel Greenblatt has consistently said that results should be measured over time and every once in a while there would be stretches where the magic formula does not work.
6. How Bad Will This Get? The US Dollar.
(via www.fwallstreet.com)
“When the markets are flying high, value investors tend to sit back and let things happen. When they crash, we must start looking for opportunities — dissecting information, scouring annual reports and proxy statements, and evaluating which companies will survive and which ones will die. (That’s why I haven’t been around as much lately. Sorry.)”
7. Altria’s Spin: Your Questions Answered
(via valueplays.blogspot.com)
Answers to the most common PMI spin questions
8. How Bad Will This Get? The Recession.
(via www.fwallstreet.com)
Through our investing, we can combat the recession, achieve growth, and keep our heads above water (or fly high). To help us in that endeavor, we must understand the effects of the recession so that we pick the opportunities out of the blood on the streets.
9. World Wrestling (WWE): Cramer is Wrong – Buy for the Dividend
(via collegeanalysts.com)
A look at Cramer’s track record on the stock, and why you should buy even if the capital appreciation will be limited.
Billytickets will vote this down.
10. A Bear Stearns Market
(via www.washingtonpost.com)
“Panic is old hat on Wall Street. Rarely before, however, has there been a crisis so comprehensive as this one. It first materialized last summer in the shape of a disturbance in the low-rated, or subprime, mortgage market. “Contained,” the regulatory establishment hopefully pronounced.
11. Gannon On Investing: An Email on Economic Catastrophe
(via www.gannononinvesting.com)
Excerpt: “The Fed is in a very tough position. This is a credit problem. It’s serious. It’s hard to say what the result will be – but it could potentially be very bad. You can have some pretty catastrophic things happen when people start to panic – as far as what happens with money and how all sorts of things can seize up at once.
12. Mutual Fund Companies Make Better Investments Than The Funds They Manage
(via amateurassetallocator.com)
The stocks of mutual fund companies often make better investments than the funds they manage.
13. Understanding Valuation Measures
(via magicdiligence.com)
The second in a three part series, this article examines several valuation based formulas, explaining for each what it means, how to calculate it, what’s a good or bad number, and a simple example.
14. Special Situation: Steak N Shake a Landslide Victory!
(via streetcapitalist.com)
With the company now trading at about $8 per share there seems to be quite a bit of fear. One of the walls that stood in the way of the company’s value was their stubborn and entrenched management. With Biglari’s landslide win, change becomes very possible.
15. NVIDIA – The Fleeting Advantage
(via magicdiligence.com)
NVIDIA is a leading graphics processor maker. Over the last 3 years it has crushed it’s rival AMD (formerly ATI) in the technology battle, delivering huge revenue and earnings gains to shareholders and improving margins by 400%. But in the face of strong competition, does the company really have any durable advantage?
16. Bloomberg Interview with Jean-Marie Eveillard
(via www.bloomberg.com)
Bloomberg Interview with Jean-Marie Eveillard.
17. Sham Gad : Cash Is King Again
(via www.fool.com)
You usually don’t realize how good something is until it’s gone. For most investors, the red-headed stepchild in their portfolios is cash. When markets are advancing, it’s easy to see cash as a weak, underperforming asset that needs to be put to better use. After all, who wants sit on an asset earning low-single-digit returns when the markets are serving up double-digit gains?
18. Can’t Grasp Credit Crisis? Join the Club
(via www.nytimes.com)
It has been going on for seven months now, and many people probably feel as if they should understand it. But they don’t, not really. The part about the housing crash seems simple enough. With banks whispering sweet encouragement, people bought homes they couldn’t afford, and now they are falling behind on their mortgages.
19. Sooner Fed bail-outs than the 1930s revisited
(via www.telegraph.co.uk)
Put a clothes peg on your nose. The moral stench of bail-outs for the über-rich will be sickening. None of us wants to pay a farthing to rescue the bankers and assorted debt pimps who got us into this financial mess, and in doing so exposed our societies to such harm.
I found the comments to be the best part. Very thought-provoking
20. Why Paying $5 Per Share For Bear Stearns Might Make Sense
(via stockmarketbeat.com)
Bondholders can use options to hedge a stock buy, and effectively buy the right to vote in favor of the deal for $0.35 per share.
AutoNation (AN) looks more appealing each time I look at it.
Still thinking about autos and no, not Ford (F) or GM (GM).
Eddie Lampert, can’t seem to buy it fast enough and he currently owns over 35% of the company.
Forecasts this year call for about 15.5 million cars to be sold. Now, interesting tidbit. On CNBC Wednesday, CEO and Chairman Mike Jackson did an interview and was speaking of running his (or any) business. In the interview he said he runs his business for “a 1,000 year flood”. He then said that if auto sales dropped to 10 million units, “a depression” he called it, his business would be “cash flow neutral”. That is his based for decision making.
As a potential investor, this is fantastic news. It simply means that the business will still produce cash even in an almost devastating economic climate. Wonderful…
It also makes sense as to Lampert’s interest in the company. Lampert is a cash and balance sheet investor (See Sears Holdings (SHLD)). A positive cash company in the current economic climate makes for tremendous flexibility competitors will not have. Jackson can reduce debt, repurchase shares or expand. In fact, Jackson has reduced share count by 30% the last two years. The repurchases have allowed EPS to stay flat at $1.44 despite the downturn in the auto industry during that time frame.
In the past two years, U.S. auto retail sales have declined 12 percent, Jackson said in early February and he said that economic downturns run in cycles of 30 to 40 months, and the market is currently 24 months into the downswing.
AutoNation’s markets in California and Florida, who account for half of new vehicle sales drove down earnings last year. The two states account for 20 percent of industry-wide new vehicle sales.
When things get better, investor ought to see an amplified increase on the other end due to the repurchases. Hold flat in down times and explode up in good ones, very nice.
Disclosure (“none” means no position):None, yet