The hedge fund manager is known for his downside-focused, heavily consolidated positions, often numbering at fewer than 10 companies. Earlier this week, Berkowitz gave a talk at my alma mater, the University of Miami, where he is a major donor.
Bruce Berkowitz TradesPortfolio: This figure has been dramatically reduced over time due to the retail cash burn. All data derived from Real Capital Analytics www. So sinceSears has sold 2.
A majority of the malls in the country need to evolve with redevelopment. At present, Sears is typically the only anchor willing to sell back space at the best malls. The Sears there is located at the best part of the mall. It has great visibility from the main streets.
So the true value of that real estate is considerably higher than what you might think by just looking at a database. The last few years have diminished our estimate of intrinsic value by almost half due to the operating losses. The cash burn is real.
And frankly the net asset value will continue to decline until the cash burn subsides. So, we put a major haircut on something that was already discounted at wholesale values. Effectuating that corporate transformation has been costly, and the results are not yet in. What is the worst case scenario for Sears?
Given the carnage in the retail industry and the ongoing cash burn at Sears, why do you keep investing in that company? As for why we keep investing in the company, well, the price has declined much faster than net asset value.
A considerable margin of safety still remains and the operating losses can stop.
And when losses do stop, I actually believe our net asset value estimates will increase. In an earlier conference call, you mentioned your belief that the operating losses at Sears were largely voluntary.
Can you expand upon what you meant by that statement? Do you still believe that is the case? The losses at Sears in recent years have primarily been due to the transformation of Sears the retailer into a profitable operation. If you stop the retail transformation, you stop a substantial amount of the losses.
But the company is now moving faster and faster to right-size its operations. In a best case scenario, Sears is able to successfully and effectively operate as a leaner retail operation focused on Shop Your Way members — that is, focused on best members, best products, best locations — and can do it in a way where cash flows are positive and the company is able to retain control and develop its valuable real estate.
Do his secured loans to Sears outweigh his equity interests? And should we, as shareholders, be concerned? ESL Investments does own a significant amount of secured debt which would be paid first.
But as the real estate is sold, you should see those secured debt amounts diminish.
Oct 17, · Bruce Berkowitz Steps Down From Sears Board But Remains Invested. After Sears Holdings shares tumbled nearly 12% on Bruce Berkowitz ’s Berkowitz summarized his investment thesis in Sears. Bruce Berkowitz continues to add to Sears, as the stock price declined. He now owns million shares of Sears. He also added to Jefferies (JEF), which he has a lot of confidence in due to the investment of Leucadia (LUK). Bruce Berkowitz (Trades, Portfolio): Our thesis on Sears cannot be disproven: Sears has a vast real estate empire complemented by unique businesses. Sears also has constraints, and we understand.
In other words, from the current share price, how much higher will those shares have to climb for us to break even? We have a majority of that debt. So time becomes very positive when you return to profitability. And of course, I believe the value of assets that are transacted will improve.
But clearly, extinguishing the loss will put the company in a better negotiating position for its asset base. So returning to profitability is key and the time is now.
Several shareholders asked for your thoughts on Shop Your Way. It has grown substantially and significant capital has been spent on that membership program. What does its future look like, and do you have a sense of its value today? Shop Your Way is the transformation vehicle.
It also allows Sears to transition to an asset-light model and enables them to be more agile, more consumer centric. When it comes to Shop Your Way, the best thing for shareholders to do is join the Shop Your Way program and try it out.
So, test it out. Send me your feedback.Bruce Berkowitz: Our thesis on Sears cannot be disproven: Sears has a vast real estate empire complemented by unique businesses.
Sears also has constraints, and we understand those constraints. As part of our investment process, we developed progress checklists concerning Sears’ fixed obligations, balance sheet strength, footprint, . May 29, · Bruce Berkowitz’s 13F stock portfolio value decreased this quarter from $M to $M.
Fairholme added Vista Outdoor and Vistra Energy while reducing Sears and. Bruce berkowitz sears thesis 30, Sears lines up more credit from its CEO Dec.
Bruce Berkowitz: Sears Re is the company’s self-insurance vehicle.
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It allows the company to save costs by cutting out middlemen when paying claims on protection agreements and other types of insurance. Oct 17, · Bruce Berkowitz Steps Down From Sears Board But Remains Invested. After Sears Holdings shares tumbled nearly 12% on Bruce Berkowitz ’s Berkowitz summarized his investment thesis in Sears.
Bruce Berkowitz (Trades, Portfolio): Sears Re is the company’s self-insurance vehicle. It allows the company to save costs by cutting out middlemen when paying claims on protection agreements and other types of insurance.