Monday, November 07, 2005


The excitement of the Sears real estate play is over. The stock ran too far and now has probably collapsed too far. I don't plan to buy (I'm cash flow poor) but I probably should find the will or the way.

On the other hand, the next move up in real estate will probably be to a multi-year top. REIT's are currently yielding less than 3%. The big run is over but then the last leg is often the sharpest spike.

Nimble investors should consider jumping on Sears, SHLD, because Eddie Lambert is a smart investor. He is unlikely to fritter away stockholder value. He will close unprofitable stores and cut cost. One obvious opportunity is to cut distribution costs. In case you have not heard, the big secret of Wal-Mart has been to open stores near distribution centers to cut distribution costs. The combination of Sears and K-Mart locations should provide savings opportunities.

On the other hand, the business cycle suggest that it is not the time to buy into "big ticket" stores. It is the grocery type store, selling necessities, that will do well for the next several years. Only those who are willing to play the bounce should jump on Sears right now.