Trading out Sears common...

Man, Sears is really struggling these days!  Frankly, with things as bleak as they are, it wouldn't surprise me to see some big changes in the near future - perhaps we'll see significant store closings, or maybe a large real estate transaction.  Your guess is as good as mine.

So, with their stock in the mid-30's, I figured it was time to swap out the common and add some options!  Specifically, I sold my 400 shares at $34.25 (for total proceeds of $13,698).  I then bought 15 SHLD Jan 2016 $60 contracts at $4.40 (for a total outlay of $6,607).  Wish me luck!

Questions?  Comments?  Email mevsemt@gmail.com.

Time to be fearful?

The best time to be fearful is when others are greedy, and with that in mind I reduced my Sears Holdings position yet again.  Specifically, I sold my 10 SHLD Jan 2015 62.50 contracts for $11.30 (for total proceeds of $11,288).  You'll recall I purchased these back in July at $3.65 per contract (here's the post: http://mevsemt.blogspot.com/2013/07/more-sears.html), so it was a very profitable 4 months!

Questions?  Comments?  Email mevsemt@gmail.com.

Easy Come, Easy Go...

Well folks, this is going to be short and sweet...

Similar to my previous post, SHLD has continued its steady march upward.  So today I trimmed my position yet again.  Specifically, I sold 10 SHLD Jan 2015 $60 contracts at $11.70 (for a total proceeds of $11,688).  Given that I bought these contracts less than a month ago at $2.95 (http://mevsemt.blogspot.com/2013/08/call-me-crazy.html) this was a nice little gain!

Questions? Comments? Email mevsemt@gmail.com

Know when to hold'em?

For those of you keeping track, you know I've recently been buying a lot of SHLD LEAPS.  Then, much to my surprise and delight, SHLD went on a tear starting in late August.  Today it went up over 12%... on no news whatsoever!

Now I know SHLD is ripe for a short squeeze, and it seems like we're in the middle of one right now (~90 MM shares are held by long-term owners and index funds, ~16 MM are shorted, and there are only ~106 MM shares outstanding, hmmm...).  However, the truth is I have no idea how to trade around this type of thing, and with the run-up SHLD has become a significant % of my portfolio.  So today I let prudence take over, and sold both my SHLD Jan 2015 $72.50 and $85.00 LEAPS, for proceeds of $3,438 and $4,681, respectively.

Now it's not like I'm bailing on SHLD, after all I still hold the common, as well as the Jan 2015 $60.00 and $62.50 LEAPS.  Rather, today's transactions were more about managing my portfolio's composition, keeping an eye on risk, and holding my temperament in check.

Questions? Comments? Email mevsemt@gmail.com.

Call Me Crazy...

You know, it isn't easy being a value investor, and this is especially true when you blog about your picks in real time.  After all, just about anything I buy has significant "headline risk," and is likely in the midst of some sort of turmoil.  In other words, I have to be willing to look dumb now with the hope of being right later.

So what's new?  Well, I'm not just waxing philosophical on a Monday afternoon.  In fact, this post is to alert my readers that I bought more SHLD options today.  Specifically, I bought 20 SHLD Jan 2015 $60 contracts for $2.95 (for a total outlay of $5,919).

Now I can almost hear the collective groan through my screen, "oh geez mevsemt, not more Sears!"  But here's the thing, SHLD has a decent margin of safety.  I'm mean they've got real estate, brands, Lands' End, 51% of Sears Canada, owned inventory, etc.  Of course they also have things on the other side of the balance sheet (like that pesky pension), but suffice it to say I think the assets far outweigh the liabilities.

There's also another interesting dynamic that could be going on here (warning: the following is idle speculation).  First, Eddie has been selling/trimming everything in his hedge fund except Sears, and I think he personally owns somewhere around +30 MM shares.  Concurrently, Bruce Berkowitz (a long time supporter of Eddie), has recently been accumulating Sears, and is now up to roughly 20 MM shares.  Hmmm... 50% of SHLD in friendly hands... could Eddie be winding down his hedge fund?

And ultimately, even if Eddie has no intention of quitting the hedge fund business, SHLD still represents an opportunity to invest alongside an incredibly talented investor and businessman at a reasonable price, and these situations don't happen everyday...

Questions? Comments? Email mevsemt@gmail.com

More Sears...

It seems like Sears can't catch a break.  And, while everything else has been rallying this week, SHLD proves to be the problem child yet again, and is actually down.  So what do I do?  Well, I buy more of course!

Since I've talked about SHLD ad nauseum, I'm not going to rehash my whole investment thesis here.  Rather, this is just a courtesy post to disclose a new purchase in real time.  Specifically, I bought 10 SHLD Jan 2015 62.50 contracts for $3.65 (for a total outlay of $3,662).  Wish me luck!

Questions?  Comments?  Email mevsemt@gmail.com

Buy Mortimer, Buy?

Well, this may look kinda silly given my previous post, but today I bought 10 SHLD Jan 2015 72.50 contracts at $4.14 (for a total outlay of $4,152).  Here's why...

First, Sears dropped significantly after releasing earnings, and as a result the price of these contracts also fell quite a bit.  Additionally, compared to the SHLD options I recently sold, these new options have much more time until expiration.  They also make up a smaller % of my portfolio, which means there's less portfolio risk overall.  And lastly, as I mentioned previously, I'm still very optimistic about SHLD's future.  Wish me luck!

Questions? Comments? Email mevsemt@gmail.com 

Sell Mortimer, Sell!!

Today, with a loud sigh and heavy heart, I sold my 20 SHLD Jun 2014 65.42 contracts at $4.45, for total proceeds of $8,881 (basically at breakeven).

Now, I imagine you're all thinking the same thing, which is "WTF mevsemt?!  Sears, isn't that your baby?"  So here's the thing, although I'm still very optimistic about SHLD's future, I also viewed these options as the single most risky part of my portfolio.  For one, they expired in roughly a year.  Additionally, they were still pretty far OTM.  So, regardless of what I think about Sears, with any kind of broad market pullback or economic downturn, the value of these options could quickly evaporate.

Furthermore, with the market hitting new highs on pretty much a daily basis, it seems like just about everyone is reaching for return.  Personally, I think it might be a good time to be fearful...

Questions?  Comments?  Email mevsemt@gmail.com

Just Some Minor Tweaks...

Well folks, this post will be short and sweet.  As always, I post anytime I buy or sell a stock, so this is just to keep my readers in the loop on the transactions I made Friday.  

Specifically, I sold my SHLD Jan 2014 55 (50.42 post adjustment) and Jan 2014 85 (80.42) call options, for proceeds of $16,621 and $1,158, respectively (my cost basis for these were $4,012 and $4,362).  In conjunction with this sale, I purchased 20 SHLD Jun 2014 65.42 contracts for a total outlay of $8,819.

So what's the logic here?  Well, I always get nervous when options are within a year of expiration, and the transactions I made Friday effectively "rolled" the expiration date 5 months forward.  Additionally, these transactions increased my cash position by roughly $9K, bringing my portfolio to 42% cash.  By the way, at the risk of sounding like a broken record, this is exactly what I want with the market bumping up against new highs.  

So what's next?  Well, it occurs to me that I haven't bought a "new" company since 2011.  Essentially, over the last 15 months I've basically just been "harvesting" gains or tweaking existing positions.  Admittedly, this is pretty boring stuff, but someone's got to do it ;).  

In the meantime, I'll keep looking for new opportunities.  If you know of any, I'm all ears!

Questions?  Comments?  Email mevsemt@gmail.com 

Here we go again...

I'll tell you what - owning Sears Holdings is not for the faint of heart.  

In the last year, we've seen the spinoff of Orchard Supply, a rights offering for Sears Hometown, and the partial spinoff of Sears Canada.  A small handful of stores/lease-rights were sold (for almost half a billion dollars), and a number of other stores have been closed down.  Sears's Chairman, Eddie Lampert, has purchased roughly 7 million shares for his personal account (representing 6-7% of the company).  Yet, at the same time, we've seen the core retail operations continue to flounder, with no turnaround in sight.  

Recently, in an interview with Fortune, Bruce Berkowitz (one of my favorite investors and the largest owner of Sears behind Eddie) said "the value of Sears would be over $160 a share if the land on its books was fully valued."  He then went on to say "I think Eddie Lampert will end up being one of a few unbelievable case studies on what it means to be a long-term investor."  Here's the link to the full interview: http://finance.fortune.cnn.com/2012/11/26/bruce-berkowitz-fairholme/?source=yahoo_quote.

Anyway, I continue to be optimistic about Sears (depending on your perspective, feel free to replace the word "optimistic" with stubborn, foolhardy, etc.).  So, on Friday I took advantage of the stock's recent decline and bought 20 contracts of the Jan 2015 $85 LEAPS at $1.87.  Including commissions, this cost me a total of $3,759.  Wish me luck!

Questions?  Comments?  Email mevsemt@gmail.com

Sears Rights Offering...

For those of you following Sears Holdings, you know they distributed rights to purchase shares in their upcoming spin off - Sears Hometown and Outlet Stores (will be traded under SHOS when listed in October).  Specifically, for every regular share of Sears I own (excluding options), I received one SHOS right (traded under SHOSR).  Each right entitled me to buy roughly .22 shares of SHOS at $15.  Given that I own 400 shares of SHLD, I could've used these rights to pick up 87 shares of SHOS for about $1,305 (note: this excludes any impact of the SHOSR over-subscription privilege).

Now, this has special-situation written all over it, and at $15 a share I think SHOS could be a good value.  Nonetheless, I sold SHOSR yesterday at $2.60 per right, for total proceeds of $1,035 (after fees & commissions).  Here's why...

Had I exercised my rights, I would've foregone the sale proceeds of $1,035.  So, the real economic cost for me to participate in the spin off would've actually been $1,305 + $1,035 (cost of shares plus foregone proceeds), which equates to almost $27 per share for SHOS.

Questions? Comments? Email mevsemt@gmail.com.

Quick Update

This post is just a quick update on a transaction I made today.

As you'll recall, I trimmed my Sears position (by selling Jan 2013 $95 calls) earlier this year.  However, the last month or so has not been kind to the stock (it's fallen from the mid-80's to the high 50's), and I figured I'd use this pullback as an opportunity to add to my position.  Specifically, I purchased 10 Jan 2014 $85 LEAPS at $4.35 per contract, for a total outlay of $4,362.

Questions?  Comments?  Email mevsemt@gmail.com

He who rides a tiger is afraid to dismount...

That Chinese proverb just about sums up my feelings on Sears Holdings, which has been on an absolute tear in 2012.  Nonetheless, after much deliberation (and honestly, angst), I decided to trim my position once again.  Specifically, on Friday I sold my remaining 25 contracts for the Jan 2013 $95 options at $6.80, generating proceeds of $16,986 (I'd sold the other 10 contracts in February 2012 for proceeds of $1,239).

For those of you following my blog, you know I first bought these particular options all the way back in November 2010.  Between then and August 2011, I added to my position 3 more times (click on the "zz Sears" label to the right to read about all my Sears transactions).  When all was said and done, I'd invested $14,592.  Then came December 2011, which was not kind to Sears investors.  In fact, as of 12/31/2011, my 35 contracts were worth $210 (that's no typo, my $14.6K investment had shrunk to two hundred bucks!).  Now, less than 3 months later, those same 35 contracts have been sold for total proceeds of $18.2K!

But why sell now, after all things are just getting interesting?  Well remember, I'm not selling out of Sears, but rather just trimming my position.  In fact, back in December when things were looking really bleak, I bought $18,329 of stock plus an additional $4,012 of Jan 2014 $55 options.  So, given my significant exposure to Sears from these purchases, I could no longer justify holding options that were both 1) out-of-the-money and 2) had less than a year until expiration.

Questions?  Comments?  Email mevsemt@gmail.com

‘Cause the loser now will be later to win…

Well there you have it.  I’ve been banging my head against the wall over Sears Holdings for almost a year and half, and until recently had nothing to show for it other than significant losses.  Nonetheless, despite floundering retail operations, I continued to believe there was significant value in the brands, real estate, etc.  Here’s a quick trip down memory lane…

Starting in November 2010, I began buying call options.  Over the next 13 months, I added to my Sears position ON FIVE ADDITIONAL OCCASIONS, with the latest purchase in December of 2011.  If you’ve got some time to kill, click here (http://mevsemt.blogspot.com/search/label/zz%20Sears) to see all my previous commentary and real time transactions.  By the way, at year end 2011 prices, I had lost money on every single one of these purchases.

But then something happened.  Starting in 2012 Sears began to take off.  And today Sears is up an additional 20% after releasing earnings and publishing Chairman Eddie Lampert’s annual shareholder letter.  Why?  Well, I’ll let you read the letter yourself (http://searsholdings.com/invest/index.htm#letter), but in short, Sears is doing exactly what I hoped/predicted.  They are selling and distributing some of their assets and operations.  As a result, the market is starting to see Sears as a collection of valuable assets, and not just a struggling retailer.

So how will this turn out for me?  Well, as of now I have no idea, but I’m happy to say my position in Sears has turned positive, and by a healthy amount.

Questions?  Comments?  Email mevsemt@gmail.com.

Quick Update

Yesterday I sold 10 Sears Jan 2013 $95 call options at $1.25 per contract.  If you've been following the stock, you know it's taken off in 2012.  In fact, between my call options and common stock, Sears was roughly 12% of my total portfolio coming into the year.  Before yesterday's transaction, it had gone up to 22%.  So do I think Sears is overvalued?  No, not by a long shot.  However, since it had become the single largest position in my portfolio, I figured the best thing was to be prudent and trim it back a little.

Questions?  Comments?  Email mevsemt@gmail.com.

More Sears

Just a quick update.  After Sears's gut-wrenching plummet the other day, I decided to add to my position.  Specifically, I bought Jan 2014 $55 call options (20 contracts at $2.00), costing me a total of $4,012.

Questions?  Comments?  Email mevsemt@gmail.com

Kmart Smart?

I've written about Sears ad nauseum, yet I've got nothing to show for it but egg on my face.  Indeed, over the past year, the company's consolidated operations have gone from bad to worse.   However, I still believe there's a lot of underlying value here (real estate, Kenmore, Craftsman, Sears Canada, Lands End, Home Services, etc.).  Further, anyone who owns Sears common stock is closely aligned with Eddie Lampert (and if you look at Autozone's chart from the late 90's through today, you'll see there could be worse things!).

With this in mind, I decided to sell cheap to buy cheaper.  Specifically, I sold my 625 shares of JCP at $32.34 (originally purchased at $25.47 in September 2011) and bought 400 shares of SHLD at $45.81, making it my second largest holding.  Wish me luck!

Questions?  Comments?  Email mevsemt@gmail.com

Light Commentary and Some Links

I'm going to try something a little different today.  Recently there's been a handful of interesting articles/analyses/press releases on companies I own, so I thought I'd provide the links and do some light commentary around them.

First there's Terra Nova (TTT).  As discussed in previous posts, the company is basically an investment vehicle for Michael Smith.  But since no acquisitions have been made, owning TTT requires a bit of blind faith in Smith.  In this vein, here's one of the best analyses I've found on his historical track record: http://seekingalpha.com/article/290755-15-for-15-years-michael-j-smith-s-outstanding-track-record?source=yahoo.

Then there's Sears.  They're spinning off Orchard Supply, started selling Craftsmen tools at Costco, and hired a new CFO.  Taken individually these may not sound like much, but taken together this may signify the beginning of a transformation from a retail operation to a brand/real estate/asset holding company.  Here's a good blurb on the Craftsmen part: http://seekingalpha.com/article/292376-sears-holdings-externalizing-brands-could-be-major-catalyst-for-stock?source=yahoo.  Here's the Wikipedia page on the new CFO: http://en.wikipedia.org/wiki/Robert_Schriesheim.  Clearly, Schriesheim is a turnaround/restructure guy - my guess is Sears wouldn't have hired him unless this is their intent AND he wouldn't have accepted the job unless he judged there was a reasonable likelihood of succeeding.  And lastly, if you're sick of my bullish sentiments, here's a good commentary with a bit more of an even keel: http://seekingalpha.com/article/292409-whether-we-should-throw-in-the-towel-on-eddie-lampert-and-sears-holdings?source=yahoo.

And what about JOE?  Well, regular readers know I'm a huge fan of Bruce Berkowitz.  In fact, his involvement with St. Joe is one of the main reasons I bought the stock (http://mevsemt.blogspot.com/2011/05/new-coattails-to-ride.html).  Additionally, Berkowitz has been an investor in LUK (my largest holding) for 10+ years.  So what's the connection?  Well, LUK has done commercial/residential real estate development on the Florida panhandle, and JOE's recent appointments/hires of Brady, Bienvenue, and Keil all come from LUK.  Frankly, it wouldn't surprise me to see LUK and JOE partner up sometime in the near future.  Lastly, JOE has recently agreed to let Berkowitz acquire up to 50% of their shares (he currently owns 30%), so my guess is he's confident in their prospects.

Well, I hope you enjoyed the commentary and links!  And I always like hearing from my readers, so feel free to email me with any comments or questions (mevsemt@gmail.com).

Cash and Cojones, Part II

Back in May I wrote a post titled "Cash and Cojones," (http://mevsemt.blogspot.com/2011/05/cash-and-cojones.html) in which I said the following:

Recently I've read a handful of articles that basically say the same thing in different ways: proceed with caution.  Or, to put it more colorfully, in early 2009 you only needed two things to make a killing: cash and the cojones to commit it.  Ironically, if you had those two things in 2005-2007 you probably got killed.  So what does the market feel like today?  Well, while we may not be quite at the excesses of 2005-07, we're definitely nowhere near the palpable fear of early 2009.

So the real question is what’s an investor to do?  Obviously I have no idea what the right answer is (remember, I'm just some guy with a blog), but I’ve been focused more and more on mitigating risk and less and less on reaching for returns. 

So, out of a general sense of concern and nervousness I managed to keep a large % of my portfolio in cash.  In fact, at the end of Q2 my cash position was 37% (http://mevsemt.blogspot.com/2011/06/q2-2011-returns.html).  However, over the recent days/weeks the fear in the market has grown steadily and, while it might not be 2009 all over again, I'm wondering if maybe now is the time to start using some of that dry powder... 

With that in mind I decided to dip my toe in the water by adding to my SHLD LEAPS.  Specifically, I bought Jan 2013 $95 call options (10 contracts at $3.00) for a total outlay of $3,010.76. 

On a side note there are a ton of stocks I've added to my watch list, some of them are new (MS, JEF, AMD) and some are old friends (SD, USG, NRG).  As always, if I buy or sell anything I'll do a quick write up that day.  Good luck everyone, and for those of you worried about the market decline just remember - this too shall pass.

Questions?  Comments?  Email mevsemt@gmail.com.

I too like to live dangerously...

I just purchased 5 additional contracts (bringing my total to 25) of SHLD Jan 2013 $95 LEAPS at $4.50 for a total outlay of $2,258 (including commissions).  Wish me luck!