Wednesday, October 3, 2007

Ackman Buying Sears Holding Shares

Good news for Sears Holdings shareholders.

At a charity event in Dallas yesterday William Ackman, the owner of activist hedge fund Pershing Square Capital, told the audience that he owns a 5 million share (3.5%) stake in Sears Holdings Corporation (SHLD) . Unlike Ackman's large stake in Target (TGT) in which he pushed for a sale of companies the credit card unit, Ackman said was thrilled with the efforts of Sears' Chairman Eddie Lampert and was looking forward to working with him.

The two have a history as last year, Ackman won a battle against Lampert's Sears Holdings in the $899 million attempted takeover of Sears Canada. Ackman successfully argued that Sears Canada was worth at least twice what Lampert offered and Lampert was only able to purchase 70% of the company.

Ackman must be planning on being a partner with Lampert. The reason? Lampert at this point must own over 50% of the outstanding shares depending on how much of the $1.5 billion buyback the company completed in the last quarter.

If nothing else, this illustrates the potential in the shares that at $138 a share are vastly undervalued. Sears has been trading in sympathy with both the homebuilders and the financials (Sears is a quazi hedge fund with Lampert's ability to invest its cash at his discretion) lately and both those sectors have been hit hard. Now that they are rebounding, expect that and the Ackman news to push shares higher.

I have said it before and it bears repeating, if you are buying shares in a company and you have people like Ackman and Lampert buying shares in the open market with you, you have to feel very comfortable with your decision.

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