Year-to-date gains: 32%
Yes, believe it or not, beleaguered retailer Sears Holdings (SHLD) is one of the year’s biggest winners. It’s a surprise, simply because revenue has declined in each of the past eighteen quarters, the company’s been dipping deeper and deeper into the red ink each quarter, and analysts say there’s no end in sight for the nasty trend.
The market, however, doesn’t seem to agree with analysts’ pessimistic outlook. What are investors seeing in Sears that the professional stock handicappers don’t?
It’s the realizations that (1) the sum of the individual parts here are greater than the whole, and (2) acting CEO Eddie Lampert has made it more than clear he’s willing to part out those pieces — individual stores — in order to maximize shareholder value. (He’s the biggest shareholder, of course.)
A report published earlier in the year figured the value of just the top 400 stores in the 2,000-store chain were worth $7.3 billion if sold, which is far greater than the company’s market cap. It looks like the company has shrunk itself into the real estate play so many investors thought Lampert had in mind when he first acquired the company.
As a real estate play, however, it’s still undervalued even with this year’s big advance.