Monday, August 13, 2007

Lampert Gobbling Up Sears Shares

Sears Holdings (SHLD)chairman Eddie Lampert was a busy buyer last month Sears said it spent $800 million in the last month buying back stock and said its board approved an additional $1.5 billion repurchase plan. The company bought back $1.5 billion in stock during the second quarter at an average price of $153.

A $3 billion total buyback, big deal. Well, it is really. $3 billion represent 15% of Sears Holdings current market cap and that is a very big deal. Also, unlike the massive buyback announced at Home Depot (HD), Sears can accomplish it's plans with the cash it has sitting in the bank. There will be no need to tap currently the restrictive equity markets for cash. We can be as certain as we can be that these shares will be repurchased. Based on Lampert's history, it will be sooner rather than later.

Retail is hurting currently and Sears share price is suffering. But, ever the value investor, Lampert is taking Buffett's advice and "buying fear". Eventually thing will turn around and Lampert is using this weakness to buy shares at a discount.

It is important to note that last fall and winter when shares were in the $180's Lampert sat on his hands and did not repurchase shares. Now that prices have dropped, he is jumping in big time.

Have patience shareholders.


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