In this article the author outlines the usual reasons why Sears (SHLD) has declined over the last several years. His comments on declining sales, lack of revenue growth, asset dispositions, and management changes are all accurate.  What people don’t realize is that one of the smartest decisions Edward Lampert made was not too invest any more money then he had to in a dying retail model.  Just look at Best Buy (BBY) which has had a sterling reputation as a best in class retailer and the struggles that they are having dealing with competition from the likes of (AMZN).  Would shareholders really be better served with Sears blowing cash attempting to compete dollar for dollar with a Wal-Mart (WMT) or a Target (TGT) which have better distribution and a lower cost structure, without the burdens of a the legacy pension costs that Sears has?

Instead Lampert has tried to compete with technology and has had some successes such as their online shopping experience which has been growing quite nicely, and which doesn’t require the fixed costs that a pure retail operation does.  Now Lampert is monetizing some of their real estate assets which have enormous value, and they are seeking ways to license their brands to get better distribution.  These sound like solid business moves particularly because many of the stores that are being closed or sold are not profitable, and there is no need to keep throwing good money after bad.

Once again an author insinuates that shareholders aren’t likely to benefit from any liquidation for Sears which is pretty laughable considering Lampert and his hedge fund ESL are the biggest shareholders.  The article also doesn’t mention Lampert buying $150MM in shares at around $30 earlier in the year and the fact that he didn’t sell any of them.  At T&T Capital Management we sold all of our Sears stock at just above $80 a share and we still have just a few sold puts which we are comfortable holding.  The puts provide a tremendous amount of premium and if we were to be exercised on them we’d end up owning the stock quite a bit lower than it is currently which is a risk we are certainly willing to take.  We also own bonds on Sears which have worked out nicely thus far and that we think are likely to be money good.