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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