SHLD anyone?

[FCharlie]

Every time SHLD gets down to these levels I go through the basic liquidation analysis and find myself shocked at how low SHLD is being valued relative to it's assets. Are there any others out there who still own SHLD, or have all given up hope? Seems like there's only going to be three shareholders left (Lampert, Tisch, Berkowitz) if this pessimism keeps up.

Inventory (at cost) net of accounts payable is higher than the market cap. At retail price, owned inventory is significantly higher than the market cap.

Real Estate (at cost) is significantly higher than the market cap

Pension and mediocre cash flows are the largest problems here, although cash flow is enough to fund the pension even at these high levels.  Too many stores are losing money, yet they stay open, even though it would seem the company could make a lot of money if the lagging stores were closed... Shares outstanding keep shrinking. The company has recently put nearly all of it's stores up for lease, sale, or partial lease... A move that would have been very exciting in the past, but today, no one seems to care... Berkowitz, Lampert, Tisch seem to be the only ones left in this one, and judging from their statements in interviews and at the annual meeting, none appear concerned at all.

There's huge temptation here to go in big. Is it possible for these three to be wrong?

[mevsemt]

Funny you should bring it up... I bought yesterday... http://mevsemt.blogspot.com/2011/12/kmart-smart.html

[txlaw]

I bought some SHLD today after seeing that it and RIMM were the only two companies in my watch list that were down.  I have owned SHLD before, but haven't had it in my portfolio for a while.

As much as I have been criticizing Lampert for not just spelling out what he's going to do with the real estate (my hope is that there will be a big deal with the better retailers out there to take over a number of cash bleeding Sears locations), I believe that the runoff value is easily above the current market price.

Hopefully, it goes down even lower.

[zarley]

Funny, I added to SHLD last week at $45.60.  It's still my smallest position at ~5%, but the price does seem quite low.  Operational concerns aside, the current price offers pretty good odds as I wait for Eddie the python to swallow this pig. 

[tooskinneejs]

"Inventory (at cost) net of accounts payable is higher than the market cap. At retail price, owned inventory is significantly higher than the market cap."

What about the $4 billion or so of net debt that would need to be paid off to own the business (or its assets) free and clear?

"Too many stores are losing money, yet they stay open, even though it would seem the company could make a lot of money if the lagging stores were closed."

Outstanding lease obligations.  Maybe they believe its better to cover part of your lease costs rather than none of it.

[ERICOPOLY]

The $45 strike 2013 put has a bid of $14.20.  The $45 strike call has an ask of $8.95.

Meanwhile the stock is $46.

Why are you guys buying the shares?

[txlaw]

The $45 strike 2013 put has a bid of $14.20.  The $45 strike call has an ask of $8.95.

Meanwhile the stock is $46.

Why are you guys buying the shares?

Because options strategies hurt my head!

Also, call me old fashioned, but I just like to own companies or buy options to purchase stakes in companies. 

[ERICOPOLY]

My options strategy gives you 1.59x leverage without increasing your downside.  Reinvest all of the proceeds from writing the put into purchase of the call.

Same downside.

1.59x upside.

[FCharlie]

The $45 strike 2013 put has a bid of $14.20.  The $45 strike call has an ask of $8.95.

Meanwhile the stock is $46.

Why are you guys buying the shares?

I am both short puts, and long stock at the same time. You are correct it makes no sense to own shares outright, but I too like owning the shares as well.

The premium is incredible. Why would the $30 2014 put trade for $10? SHLD would have to drop to below $20 for this to end up profitable for a put buyer. At that price, you're talking $2 billion market value, but also at $20, the company could easily take itself semi-private with cash on hand. They could do that now, but they could EASILY do it at $20.

[txlaw]

My options strategy gives you 1.59x leverage without increasing your downside.  Reinvest all of the proceeds from writing the put into purchase of the call.

Same downside.

1.59x upside.

I just went to pen and paper to calculate this out (can't do these things in my head). 

I see what you're saying.  Honestly, it never even occurred to me to look at the difference between the put and the call premiums.  Guess I should have.