{"id":27940,"date":"2012-03-05T02:07:56","date_gmt":"2012-03-05T07:07:56","guid":{"rendered":"http:\/\/countingpips.com\/fx\/2012\/03\/05\/follow-up-is-sears-the-next-berkshire-hathaway\/"},"modified":"2012-03-05T02:07:56","modified_gmt":"2012-03-05T07:07:56","slug":"follow-up-is-sears-the-next-berkshire-hathaway","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2012\/03\/05\/follow-up-is-sears-the-next-berkshire-hathaway\/","title":{"rendered":"Follow-Up: Is Sears the Next Berkshire Hathaway?"},"content":{"rendered":"

By The Sizemore Letter<\/a><\/p>\n

\"\"<\/a>Late last year, I asked openly if Sears (Nasdaq: $<\/span>SHLD<\/a>)<\/strong> could be the next Berkshire Hathaway (NYSE: $<\/span>BRK-A<\/a>)<\/strong> (see “Is Sears the Next Berkshire Hathaway?<\/a>“<\/strong>).<\/p>\n

The article was admittedly a bit of a tease.\u00a0 When I suggested that Sears might be the next Berkshire, I didn\u2019t intend it as a compliment.\u00a0 As I wrote in December, everyone assumes that Warren Buffett\u2019s decision to buy Berkshire Hathaway was one of his typical strokes of genius. Nothing could be further from the truth. In fact, Buffett revealed in a video interview that Berkshire Hathaway was the worst trade of his career<\/a>, as a \u201c$200 billion mistake.\u201d<\/strong><\/p>\n

Like Sears under chairman Eddie Lampert, Berkshire Hathaway was a company in terminal decline when Buffett bought it.\u00a0 Buffett spent the first few decades as owner slowly shuttering the company\u2019s factories, selling off assets, and redeploying the cash to more profitable ends.<\/p>\n

Whether it was his intention or not, it appears that Lampert is following the same path.\u00a0 Late last month, the New York Times reported that \u201cIn a Gamble for Cash, Sears Plans to Sell Stores<\/a>.\u201d<\/p>\n

Sears intends to raise nearly $800 million in cash by selling off some of its stores.\u00a0 The move should placate investors who feared that the company\u00a0 was running out of cash, but it also makes it very clear that the company has no long-term future.\u00a0 Sales have been in decline for five consecutive years, and you certainly don\u2019t reverse that trend by selling off stores.\u00a0 Like Berkshire Hathaway, there will likely come a day when Sears exists as a holding company and nothing more\u2014and that day may be coming soon.<\/p>\n

In any event, Lampert continues to increase his stake in the company.\u00a0 His hedge funds now own a full 61 percent of Sears stock.<\/p>\n

Investors who shunned Berkshire Hathaway in the early days of Buffett\u2019s leadership because they viewed it as a business in terminal decline missed out on one of the greatest investment success stories in history.\u00a0 Could it be that investors currently shunning Sears for the same reasons are making the same mistake?<\/p>\n

Maybe.\u00a0 Lampert\u2019s apparent strategy of selling off Sears for spare parts and redeploying the cash to more profitable ventures may yet prove to be worthwhile.\u00a0\u00a0 And at just 0.18 times sales, Sears certainly trades at a discount to most major retailers.<\/p>\n

Still, no matter what your opinion of Lampert as a \u201csuperinvestor,\u201d it\u2019s hard to justify buying a money-losing retailer in terminal decline that is also laden with debt.\u00a0 Sears\u2019 debt\/equity ratio is 80%.\u00a0 For a healthy business, this wouldn\u2019t be a problem.\u00a0 But no one in their right mind would call a wounded beast like Sears healthy.<\/p>\n

Bottom line: If you like Lampert, follow his portfolio moves and invest accordingly.\u00a0 There are plenty of sites that supply that information, including the popular GuruFocus (see Lampert\u2019s portfolio<\/a>).\u00a0 But Sears is one that might be best avoided.<\/p>\n

If you liked this article by Sizemore Insights<\/em>, you\u2019d probably enjoy The Sizemore Investment Letter<\/em>, our premium members-only newsletter. Click here<\/a> for more information.<\/p>\n","protected":false},"excerpt":{"rendered":"

By The Sizemore Letter Late last year, I asked openly if Sears (Nasdaq: $SHLD) could be the next Berkshire Hathaway (NYSE: $BRK-A) (see “Is Sears the Next Berkshire Hathaway?“). The article was admittedly a bit of a tease.\u00a0 When I suggested that Sears might be the next Berkshire, I didn\u2019t intend it as a compliment.\u00a0 … <\/p>\n

Continue reading “Follow-Up: Is Sears the Next Berkshire Hathaway?”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-27940","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/27940","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=27940"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/27940\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=27940"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=27940"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=27940"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}