Sears Holding Corp. (SHLD)

Stock of the Day
Sears Holding Corp.
Wednesday’s Intra-day Price: SHLD – $177.96

I’ve wanted to own shares for a long time now and have not had the chance to pull the trigger. With the stock currently consolidating towards the 200-day moving average; I am starting to determine if now is the time to grab shares (for a long term perspective).

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The stock has been trending higher over the past fourteen months since the lows set just above $110 per share. I had an opportunity to enter last summer during the dip to $134 but I never pulled the trigger. We are considerably higher but that doesn’t concern me as buying high and selling higher is something I accept for quality stocks.

What concerns me is the possible shortfall in revenue due to competitors such as Wal-Mart (WMT) and Target (TGT). Revenue should decrease due to weaker same-store sales and the closure of underperforming stores. A slower US housing market will also limit the sales of appliances and electronics in Sears outlets while apparel looks to hold the stock steady across the K-mart stores.

Standard and Poor’s states that merger-related cost synergies and the repurchase of up to $604 million shares can help elevate earnings heading into fiscal year 2008.

So what does this all mean? It means that I am still bullish on a solid organization and will look to accumulate shares carefully along the long term 200-day moving average. This will be a position that will accumulate shares for a long term perspective (multiple years) which is different from my typical trend trading and swing trading strategies. See the charts for current ideal accumulation areas and past opportunities.

Next Earnings Date: 5/31/07
Sector: Consumer Discretionary
Industry: Department Stores
52-week Range: $195.18 – $134.56

Institutional Analysis:
Held by Institutions: 88.04%
Money Market: 415
Mutual Fund: 568
Other: 27

Shares Bought: 24.0M
Shares Sold: 20.0M
Value of Shares Bought: $4.5B
Value of Shares Sold: $3.8B

Top Institutional Holders; Shares:
RBS Partners, L.P.; 65,371,708
Legg Mason Inc.; 12,424,977
State Street Corporation; 5,674,174
Morgan Stanley; 3,514,036
Fidelity Management & Research Corp; 3,372,495

Key Fundamental Numbers:
Market Cap.: $27.4B
Outstanding Shares: 153.78M
Short Ratio: 7.84
Operating Margin: 2.66
Net Income $M: 1,490.00
ROA (%): 4.71
ROE (%): 12.27
P/E (TTM): 19.66
P/E (Forward): 17.40
Price to Sales Ratio: 0.52
Earnings per Share (EPS) (TTM): 9.00
Book Value per Share: 72.13
PEG Ratio: 1.58
Price to Book Ratio: 2.41

Next Quarter: 1.23
Next Year: 10.30

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Earnings:
Yearly (2007): 9.57
Yearly (2006): 6.17
Yearly (2005): 11.00
Yearly (2004): 2.52

Revenue:
Yearly (2007): 53,012
Yearly (2006): 49,124
Yearly (2005): 19,701
Yearly (2004): 17,072

Company Profile (via Yahoo Finance):
Sears Holdings Corporation, through its subsidiaries, operates as a broad-line retailer in the United States and Canada. The company operates through three segments: Kmart, Sears Domestic, and Sears Canada. The Kmart segment operates stores that offer general merchandise, including products sold under various labels, such as Jaclyn Smith, Joe Boxer, and Martha Stewart Everyday. It also offers home appliances, including Kenmore-branded products, and groceries, as well as operates in-store pharmacies. The Sears Domestic segment operates stores offers a range of products, including home appliances, consumer electronics, tools, fitness equipment, lawn and garden equipment, tires and batteries, home fashion products, apparel, footwear, and accessories in the United States and Puerto Rico. It also offers health and beauty products, pantry goods, household products, and toys. This segment also operates specialty stores, which provide casual clothing, accessories, and footwear for men, women, and children, as well as home products and soft luggage. These products are offered through Landsend.com, an apparel Web site; and catalog mailings. In addition, this segment provides retail-related residential and commercial product repair services for home appliances, lawn and garden equipment, consumer electronics, floor care products, and heating and cooling systems. The Sears Canada segment conducts retail operations in Canada, and offers apparel and other softlines. It also offers products through its Web site, sears.ca. As of February 3, 2007, Sears Holdings Corporation operated approximately 1,388 Kmart stores; 935 Full-line Stores; 74 Sears Essentials/Grand stores; 1,095 specialty stores; and 123 full-line stores, 250 specialty stores, 50 floor covering stores, 1,900 catalog pick-up locations, and 100 travel offices in Canada. The company was founded in 1899 and is based in Hoffman Estates, Illinois.

Comments

  1. Albert says:

    Chris, Where do you see SHLD trading long term, beyond than the $195 high? All the fundamentals seem reasonable and I just don’t get the impression of any more growth potential in this sector with the big players you mentioned.

  2. Albert,
    I can’t predict but I’ll jump on a trend if it maintains the upward momentum. No one can predict where a stock will go with absolute certainty. The company is healthy and has solid management; this should lift shares over time. I wouldn’t be surprised if the stock trades above $300 per share in a few years.

    Share prices don’t scare me, so $100, $300 or $500 is the same if the stock adds value to my portfolio. Look at NVR ($800 area) in the builder section and CME ($500 area) for exchange stocks. People called them overvalued whent hey passed $200, then $300, then $400, etc!

  3. Oh no, I completely agree with you on your philosophy of price because I hold the same. I do not look at price either. I bought MA @ $42.75 and have been adding shares to my position every chance it has hit support, with my last batch coming in @ $109.07.

    I was just asking because I thought maybe you had a thought on where you saw the stock heading up to since as my previous comment, the slow growth with Wal-Mart and Target.

    I have looked at this stock over and over again but I would always bypass it for something that would grow faster (% wise).

    Also, I made this post and I never heard from you regarding it:

    A couple of stocks I have had on my radar as of late have been VCP, RKT, KAI, TIN, and SEO (Paper Group) which have been gaining favor overall and BRLC. BRLC was mentioned in IBD New America and, Eventhough it is an eratic chart, has posted positive EPS the last two qtrs on increasing revenue. Have you taken a look at any of these?

    I would like to get your thoughts.

Trackbacks

  1. […] was completely off on my timing of SHLD back in May 2007 so I may not be that bright when it comes to value companies but it’s time to […]

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