Eddie Lampert boosts his Sears stake. Why?
Insiders may sell for any number of reasons, but they buy for only one.
Even the most die-hard bear has to be at least a little nervous. It's not like he's making a symbolic move to invest in a company he happens to run. He already owns 25 million shares and through various partnerships, he has some degree of control over an additional 33.8 million.
Looking at the fundamentals, there is no outwardly visible sign of a major recovery taking place. The balance sheet is still deteriorating with shareholder equity falling from $9.1 billion in 2010 to $3.9 billion in October of 2012. Q4 earnings were better than expected but that’s hardly a trend.
Competitors like Target (TGT) saw a net income of $3 billion compared to Sears which saw negative earnings of -$930 million. Earnings per share sit at -$8.78, compared to Target's $4.52. That puts Sears roughly in-line with JC Penney (JCP).
Does SHLD have a chart that's worth $55 million? In March of 2012, the stock reached a 52-week high of $85.90. Since that time, it has lost 46% of its value after a 40% drop in just one month from November to December.
After Tuesday's 5.5% gain, the stock pushed above its 50-day moving average (DMA) and doesn't face strong resistance until it reaches the 200-DMA, which sits at $48.99. If it can break through that level, there isn't a lot of resistance above. With a short interest of more than 10%, there is potential for a near-term short squeeze, although Tuesday's news likely sent some bears running. Of course, without a strong catalyst, upside is limited regardless of the chart.
But Lampert isn't looking to day trade the company. Some bloggers noted that Vornado Realty Trust (VNO) dumped half of its position in JC Penney causing the stock to tumble 9% Tuesday. Suggestions circulated that Vornado might purchase a portion of Sears' real estate holdings, valued at an estimated $12 billion, according to the widely quoted Fairholme Case Study III.
Others note that it's not important to know the reason behind the purchase. If the CEO is adding $55 million worth of stock to his personal portfolio, he believes the stock is going higher and that is a bull case regardless of the reason why.
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The Federal Reserve is meeting next week, and several of its own financial tests for reducing asset purchases appear to have been met.
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