Trader Talk

Sears: A Paradigm for the Modern Investor


Sears as a paradigm for the modern investor: at some point, no one is a long-term holder.

The long-term buy and hold investors are not as willing to buy and hold as they used to be.

Sears , down 23 percent today, has not been a strong retail play for several years, instead long-term investors have held on because they believed there was a real estate play there. Close down those inefficient, poorly maintained Kmarts and sell them to Target.

Guess what? Today was the day when the shorter-term issues overwhelmed the long-term strategy. It's the day when those buy and hold players in SHLD looked at the press release and realized two things:

1) with EBIDTA less than half what it was last year, they were unlikely to be able to cover their expenses, which is why borrowing has risen;

2) the long-term real estate play is not materializing in the way envisioned, or as Credit Suisse noted: "we do not see the asset value heralded by the bulls as the values are dependent on a stronger retail real estate market than exists."

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