If Wall Street analysts and CNBC talking heads are so great predicting the events of 2012, how come they missed the one that was sitting right in front of them? Probably because they don’t shop at Kmart.
Let’s also discount the fact that Eddie Lambert has been proven to be incompetent long before today’s announcement. From a trading standpoint, I went short on 9/23 with Sears at $61.09 based on my model. The model told me to get out on 10/4. Of course breaking from the model I chose to stay in. The only saving grace, I was able to sell some calls against the position. The algorithm told me to go short 11/17. Roughly since that time Sears has been slowly trading down, until today, Down 27.20% for the day. (I am know sitting on roughly 47% gain in 3 month.) If you shorted at 9:30 and closed out by the end of the day you would have made roughly 10%. (intraday) The algorithm, couldn’t predict this type of announcement, oddly enough traditional valuation analysis should have…
Over the last few years I have never been able to find a positive article about the turn around at Sears/Kmart. Not once did any question the brillance in the stock buy back at around $64.30 in 2009, instead of reinvesting back into the company. Yet, I am not an analyst. I don’t get paid millions of dollars to poor over the balance sheet, channel checks, merchandising, debt issuance and so forth. I did see the 18 months of declining sales, but I guess that isn’t a concern for the analysts. What I find most interesting about this is how could all the analyst not foreseen this? I might not be a rocket scientist, but following a simple Peter Lynch / Warren Buffet investment strategy, it should have been abundantly clear Sears/Kmart was not a stock one would want to own nor probably shop at. So if your having a bad day or week or even month, just consider that Portfolio Manager Bruce Berkowitz, whose $8 billion Fairholme Fund (FAIRX) was holding 15% of SHLD in it’s portfolio today. Bruce and company are really having a bad day, week, and month because that is roughly a $200 million loss for the day.
Enough about Sears and blue light specials. Let’s not forget about the elephant in the room. Europe, really hasn’t gone away nor has it been solved, it’s just currently on vacation. If you don’t believe me just get a quote on Italian bonds. The next Euro Zone summit is scheduled to meet Jan 30th. In the meantime, you can do some studying up on what happened at the last meeting. Ice Cap management provides what I think is one of the most intelligible and realistic analysis of the Euro crisis, titled “The Smiling Faces of Ben Bernanke & Marc Faber.” If you’re just interested in the daily show/cliff notes version, click here for a 3 minute video explaining the Euro crisis.
Sorry no trades today, I am going to have to wait for the New Year when the market returns back to reality. I will be back January 4th with more trades, have a great New Year!