Sears 2009 AGM Notes

From the Motley Fool Board:

I went to the Sears Holdings annual shareholders meeting on May 4th, and thought i'd share some of what i heard.

First, i will say that i was extremely impressed with Eddie Lampert and left the meeting 100% reinforced that he is one of the smartest people out there.

The meeting was about 3 hours, the first 20 minutes or so, Bruce Johnson gave a presentation on the operating businesses, talked about things like expense control and inventory reductions, and he also highlighted things i had not noticed before, such as the improving performance of comp sales relative to competitors, quarter by quarter. The number of competitors who had comp sales worse than Sears Holdings accelerated dramatically towards the end of last year and Eddie Lampert brought up the point of saying, Which is worse, negative 4% comps four quarters in a row, or flat comps for three quarters and then a single quarter of negative 25% comps, as in the case of Abercrombie.

K-Mart had 1.4 million new layaway customers last year. Bruce Johnson talked about the subsequent purchases that layaway brings as customers visit the stores every two weeks to make payments.

Bruce Johnson talked about market share, saying that Sears Holdings has 34.6% market share in appliances, which leads all competitors, up from 30% in Q3 2007. Said they are reversing years of declines in market share in the appliance category. Eddie Lampert said that while you could sell a heck of alot of $3,000 washer/dryers at $1,500... all you'd essentially be doing is "renting market share" and that they wanted to "own market share".

Market share in other categories mentioned:

22.3% tools
14.2% home repair
21.0% power lawn and garden

The majority of the meeting though Eddie Lampert took questions from the audience. Some interesting points and comments he made were:

Lampert wants to encourage more experimentation, even though it could mean more failures.

He noted that Sears is determined not to make any "serious mistakes" that can put you out of business, he noted ethical mistakes and serious amounts of leverage as two "serious mistakes"

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Notes from AAII NYC discussion with Bruce Berkowitz of Fairlholme Fund

Notes from AAII NYC discussion with Bruce Berkowitz

[Posted by BenGrahamMan on the Motley Fool's Liquid Lounge board]

Bruce is a well known value investor with concentrated portfolios. He labeled his fund as "Focused and Value Based." The following are my notes to this wonderful meeting. I was very appreciative of the discussion.

1. "Doesn't make sense to have greater than 10 or 20 positions. Diversification is insurance against ignorance."

2. Risk is the chance of permanent loss. There are two concepts of risk.

3. Various investment rules.

A. Rule 1 - don't lose

B. Always figure out how you can "die" in the investment. He mentioned an old country song, "tell me where I am going to die, and I won't go there." Always invert. Try to die in your investment and if you find a good way to die, try to avoid the investment.

C. Crowd is comfortable, but you will pay a high price for being with the consensus.

D. Institutions have a disadvantage in investing because they have an institutional imperative.

E. Don't have a herd mentality.

F. Emphasis on Free Cash Flow and not Fee Cash Flow. Free Cash Flow means "owner's earnings." Free Cash Flow is likened to the old corner grocery store. At the end of the period, how much is left in the register after all payments are made. That is Free Cash Flow.

4. Invests with the Benjamin Graham's dividend payers. Shareholder buy-backs are a means of giving shareholders money.

5. Read annual reports backwards. After reading 60 pages you will be exhausted. Hence you will miss all the good and important footnotes.

6. Sears Holding (SHLD) ($85.26) -


A. Lampert has cards up his sleeve. He is a smart guy. The price of SHLD means you get Eddie Lampert for nothing.

B. Obvious investment is real estate for Sears.

C. Claims lots of Free Cash Flow.

D. Bought back stock at high price.

E. Think about a young Berkshire Hathaway. Buffett struggled with the ailing textile mill for over 7 years before he pulled the plug. Look what Berkshire turned into.

F. Claims that K-Mart and Sears could disappear as retailers and all is still good. If they happen to hit, merely a bonus. "What if they become a Wal-Mart?" Don't count on it, but could happen.

G. You can't kill Sears. If you can't kill it you should own it.

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Eddie Lampert: The Marriage From Hell

Inside a Sears store in the Cincinnati suburbs, Steve Sunderland, the vice president for store initiatives at Sears Holdings, is exuberant as he shows off his company’s latest experiment. With his oversize blue blazer and slightly nasal voice, Sunderland bears a passing resemblance to Steve Carell of The Office. Periodically, he interrupts our conversation to race over and hold a door open for a customer or to call out, “Have a great day, ladies!”

At this particular Sears store, Sunderland is point man for the latest test run by hedge fund manager Eddie Lampert, who is using the company as a petri dish to try out his ideas for the retail business. (Read more about Eddie Lampert.) Instead of the usual layout, which groups merchandise by type—clothing, toys, appliances—this two-level store is organized around rooms of the home, including a kitchen, kid’s bedroom, garage, and laundry room. The areas are set up, Sunderland says, “holistically.” Refrigerators and stoves are in the kitchen area, and washers and dryers are in the laundry zone.

The goal is to create a Cheers atmosphere, referring to the 1980s sitcom in which Boston barflies make up a surrogate family. Sunderland calls this “dwell.” Each area has its own pavilion, anchored by a computer kiosk called the Oracle, set up to search out Sears products. Sears has adapted the Willy Wonka, everything-is-edible approach to the mock-up rooms. Everything within them, including the paint on the walls, is for sale.

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Luck, or Skill?

Investor A buys shares in XYZ Corp., confident that the company is undervalued. He or she invests in the business, and shortly afterwards, the stock drops by as much as 50%. For well over a year, the stock price remains dormant. All the while, the investor sees share prices rising at other businesses he or she's familiar with. Investor A reassesses the situation and does nothing.

Investor B, also favorable on XYZ Corp., begins buying shares a year later at about one-half of Investor A's cost basis. The following year, Mr. Market catches up with XYZ, and the stock doubles. Investor A is back to even, and Investor B is sitting on a 100% gain.

Which investor would you rather be? With hindsight, it seems that Investor B looks rather smart and savvy, while Investor A just got unlucky buying at the wrong price or the wrong time. Actually, the situation should be viewed from a totally different perspective.

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Eddie Lampert: AutoZone's Awesome Earnings

AutoZone said Tuesday that its first quarter earnings climbed 7.0% on sales of parts with high profit margins. For the period ending November 17, the Memphis, Tenn.-based auto parts retailer reported income of $132.5 million, or $2.02 per share, compared with $123.9 million, or $1.73 per share in the similar period a year ago.

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Eddie Lampert: Message from the Chairman of Sears Holdings

To our Associates:

Yesterday, Sears Holdings announced our results for the third quarter of 2007. While we were not pleased with these results, much of the commentary in the media and on Wall Street following the results ignores the strength of our company and the progress that we have made. In fact, over the past several years, we are one of the few retail companies that have actually reduced our overall debt levels, while at the same time investing over $1 billion on capital expenditures, making investments in inventory for our customers, contributing significantly to our pension plans for our past and future retirees and repurchasing over $3 billion of our shares.

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A Storied Name on Sale?

Ackman used seemingly conservative break-up estimates. Yet the $8.5 billion enterprise value he assigned to Sears' U.S. retail real estate both on and off the mall worked out to just $33.05 per square foot, based on an estimated 257 million square feet. The number pales beside the enterprise values per square foot of Sears' various rivals.

Target and Kohl's both boast implied real-estate values of more than $300 a square foot, or around 10 times Sears' number, despite generating cash flow per square foot less than three times that of Sears. Appliance- and tool-heavy Home Depot (HD) and soft-goods-oriented Penney also have per-square-foot numbers that are multiples of Sears', weighing in at $277 and $144 respectively. The comparison gets downright nutty when Sears is compared to, say, the retailing real-estate investment trust Simon Property (SPG), which, according to Ackman, has an implied mall value per square foot of $698.

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Notes of Sears Holding 2007 AGM

Excellent notes.

Please visit: GuruFocus

Happy reading,
David

Does it pay to be 'the next Buffett'? May 6, 2006

I read this article from Omaha.com, which I find it humorous! :) Enjoy....

"The Next Warren Buffett: A Compliment or a Curse?" The business press dusts off the headline whenever a value investor manages to turn a tidy profit with a Buffett-like strategy, but it's a difficult comparison to live up to. Few - if any - have risen to the occasion. That's probably why a question mark usually is appended to the phrase.

Here are a few of the investors who have contended with the loaded sobriquet in recent years.

Edward Lampert

Status: Chairman of Sears Holdings Corp.

In the same breath as Buffett: Business Week asked whether he might be the next Buffett after the hedge-fund manager bought a controlling stake in Kmart (which he later merged with Sears). The move gave rise to speculation he might turn the retailers into a holding company like Berkshire, which was once a textile mill.

Claim to fame: Lampert's ESL Investments hedge fund has generated average annual returns of 29 percent since its founding in 1988. But not all the numbers rival Buffett's: Only 100 shareholders, mostly professional investors, turned out to hear him discuss his vision for the company at its annual meeting this year.

Verdict: Not funny enough.


L. Dennis Kozlowski

Status: Former CEO of Tyco In- ternational Ltd., sentenced to eight to 25 years for stealing hundreds of millions of dollars from the company.

In the same breath as Buffett: Kozlowski once bragged that he would be the next Warren Buffett.

Claim to fame: Grew Tyco's businesses at an impressive rate through mergers and acquisitions but looted the company's coffers for lavish parties and a number of personal amenities, including a $6,000 shower curtain and a $17,100 traveling toiletry kit.

Verdict: Not thrifty enough.



William H. Miller III

Status: Chairman of Legg Mason Capital Management and portfolio manager for Legg Mason Value Trust.

In the same breath as Buffett: Having outperformed the S&P 500 stock index for 15 years in a row, his long-term investment prowess is often compared with that of Buffett.

Claim to fame: Miller manages the $11.6 billion Legg Mason Value Trust, which follows a value investing strategy similar to that espoused by Buffett. The fund, based in Boston, has generated average annual returns of 16.49 percent since its 1982 inception.

Verdict: Not Nebraskan enough.



Christopher K. Bagdasarian

Status: Ex-convict. Bagdasarian was sentenced to two years in prison in 1998 after pleading guilty to securities fraud, bank fraud and perjury. Barred by the Securities and Exchange Commission from association with brokers, dealers or investment advisers.

In the same breath as Buffett: Fortune magazine dubbed him the next Buffett when he an- nounced a $200 million initial public offering of Normandy America Inc., a fraudulent insurance company that planned to invest float, as Buffett does for Berkshire. As the fraud came to light, the company withdrew the offering after trading for one day on the Nasdaq exchange.

Claim to fame: Lied that he achieved a 10-year average annual return of 29.1 percent on assets that ranged as high as $731.3 million.

Verdict: Not honest enough.



Gerry Angulo

Status: President and publisher of the San Juan Star.

In the same breath as Buffett: In 1989, a profile in Forbes magazine asked whether he might be the next Buffett or "just another of the stock market's overnight wonders."

Claim to fame: His now-defunct, Miami-based partnership, First Capital Partners, posted gains of 142 percent in 1988. In 1994, he bought the Puerto Rican newspaper and has devoted his career to running it.

Verdict: Not investing enough.



Nicholas D. Gerber

Status: Portfolio manager for Ameristock Mutual Fund.

In the same breath as Buffett: Told Crain Communications in 2001 that he was trying to out-Buffett Warren through his value-slanted approach to indexing. He said, "I'm getting a later start than Warren Buffett did from an age perspective. . . . We have a lot of catching up to do. "

Claim to fame: The Ameristock fund generated double-digit returns four of the five years between 1996 and 2000. Since then, the fund has trailed the S&P 500 by a little less than 2 percentage points.

Verdict: Not catching up fast enough.



Richard B. Wright

Status: 25-year-old analyst for Davis Advisors in New York.

In the same breath as Buffett: Suggested to Buffett that he look at Clayton Homes Inc. in 2003, setting in motion the $1.7 billion purchase by Berkshire Hathaway.

Claim to fame: Received a letter of recommendation from Warren Buffett, an endorsement that was dubbed "a letter from God" by Brian Sullivan, chief executive officer of New York-based executive search firm Christian & Timbers.

Verdict: Not gray enough.

Article from: Omaha

Happy investing,

Dah Hui Lau (David)

dahhuilaudavid@gmail.com

Eddie Lampert and Sears by Mike Onghai May 5, 2006

Mike Onghai shared his views on Eddie Lampert on his wonderful blog....

"Eddie struck me as somebody who is extremly balanced in his thinking. He always offers 2 sides of the coin when explaining. For example, hewould say we are doing this not because X, but because of Y. He always offersthe is, and the what is not. This to me is a sign of wisdom -- a very self-aware, very wise person. I liken this to Lao Tzu's quote. "Knowing what you know, and knowing what you do not know. That is the way to know.""

To read more: Mike Onghai's blog

All the best,
Dah Hui Lau (David)
dahhuilaudavid@gmail.com

Archive of Dah Hui Lau's Blog

Eddie Lampert: The best investor of his generation; Feb 6, 2006

He walked away from Goldman, racked up better returns than Buffett...and talked kidnappers into letting him go.

By Patricia Sellers, FORTUNE editor at large
February 6, 2006

http://money.cnn.com/2006/02/03/news/companies/investorsguide_lampert/index.htm


All the best,
Dah Hui Lau (David)
dahhuilaudavid@gmail.com

Eddie Lampert: An Olympic High Jumper?

By Brian Zen, Enlightened Investor Digest

Can Eddie Lampert jump over the Sears/Kmart seven-foot bar and one day take the torch from his hero Warren Buffett? Nobody knows. But there are some interesting parallels between the two.

http://www.gurufocus.com/news.php?id=835