Sears Filing Chapter 11
Sears Holding (SHLD) made it official yesterday, filing for Chapter 11 bankruptcy protection. This is the company that once sold home building kits to Americans from its famous catalogs. Sears was known for its Craftsman and Kenmore brands. Discover Card (DFS), the innovative cash back credit card; was launched by Sears in 1985 (I have been a Discover Card cardholder since 1986). At one point in time, Sears owned Dean Witter Reynolds, which eventually merged with Morgan Stanley (MS). Sears purchased Land’s End (LE) in 2002, ruined the brand and then divorced the brand via a spin-off.
Also, in 2002, Kmart filed for bankruptcy. Hedge fund manager Eddie Lampert controlled the debt of Kmart, took the company out of bankruptcy and then a few years later bought Sears, forming Sears Holdings (we made considerable money at the time having owned Sears stock at the time of the takeover). Kmart also intertwined with my well-publicized short position in Martha Stewart Living Omnimedia (in which we also made some nice money and my media career was cemented). Lampert was a highly successful hedge fund manager with a Goldman Sachs (GS) pedigree who had the golden touch with many stocks, including AutoZone (AZO). For that Lampert gets my respect.
Sears Holdings had some great potential, controlling great brands and real estate. However, Mr. Lampert did not know how to run a merchandising outfit. Nor did he listen to anyone with experience in retail and merchandising. I suggested many times while on Bloomberg and CNBC that Lampert should buy BJs Wholesale (BJ), an also-ran to Costco (COST), convert the Kmart locations to BJs and instantly compete with COST. My phone never rang.
BJs was taken private and them take public again. Oh well.
Parenthetically, Lampert’s college roommate was Steven Mnuchin. Mnuchin is now the United States Treasury Secretary. Steven Mnuchin also is a Goldman Sachs veteran who comes from a Goldman Sachs family. Steven’s older brother Alan is one of my Pi Kappa Alpha Fraternity brothers at the University of Pennsylvania. Maybe if Lampert did some digging into that money manager on CNBC and Bloomberg he would have tracked down that Morgan Stanley / Merrill Lynch alum (me) from Wharton and then my phone would have rung. But I digress.
So back to Sears Holdings. Along came the emergence of Amazon.com (AMZN), Wal-Mart (WMT), Home Depot (HD), Lowes (LOW), Target (TGT), Dick’s Sporting Goods (DKS), Best Buy (BBY) and Bed Bath & Beyond (BBBY). Sears became irrelevant. Lampert acted more like a hedge fund manager and less like a CEO / merchandiser. The company incurred more and more debt, operations spiralenow d downward and here we are now with the Chapter 11 filing. The question now is: will Lampert throw more good money after bad? Hey Eddie – call me now. Please note that Lampert also holds nearly 31% of the company’s stock.
Correction is Nearing an End
The recent correction, which I now call the Powell Plunge is nearing its conclusion. Friday’s snap back rally met with some resistance on Monday. That is normal as the first bounce after a correction fails and results in a retest. While Monday was not an official retest, it was close enough. Overnight futures ahead of Tuesday’s session point to a higher open.
While technology shares may be a laggard in the upcoming few weeks, I don’t expect that they will trade lower. Most likely, tech shares will reawaken after reporting earnings which will be next week and the following two weeks.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC had no positions in stocks mentioned — although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right-hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
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