Sears Canada (SCC-T)

At this time, this is a speculation not an investment. He wouldn’t invest money you can’t afford to lose, because there is a possibility this could go to zero. There is value within their brands, but the retail part of the company has failed. A lot of creditors are circling.

The “walking dead”. A hedge fund manager took control of Sears in the US, which owns Sears Canada as well as Kmart, and didn’t put a nickel into modernizing stores or keeping them up in any way over the years. Thinks the stock goes to zero.

Welcome to retail land. The retail sector has been semi-annihilated by Amazon. Others are saddled with high cost rent. He does not want to gamble on rebuilds and this one is too hard to see the outcome in.

A weird company because it occasionally dishes out a big dividend. Dividend seems to be okay and it doesn’t seem to collapse.

If looking for a short-term trade than your call has to be threefold. 1.) More dividends coming out of the company to get rid of its cash on the balance sheet. 2.) The US parent comes in and buys it. 3.) More real estate liquidation, which would highlight the value that is inherent in the company. Thinks the value has already been had in the company, so there is a bit more risk now.

(Market Call Minute.) Basically they are winding down, so why own it.

(Market Call Minute) They sold off all of the crown jewels, leaving them with stores and they can’t run stores very well.

It is not a play on retail but on real estate. All the best locations are being sold off. What they have been doing is shrinking. Their best locations are being sold off. The funds are going to the US. They don’t plan to reinvest in stores because they will pay out a big dividend.

(Market call minute.) Doesn’t think they can turn it around, but if you own, you should continue to hold because he thinks you are going to realize money elsewhere as it sells off more assets.

Sears is taking itself apart ultimately either to distribute assets to investors or to continue to milk it for capital. No evidence that they are doing any different in Canada. It gets harder to sell the company when you have gotten rid of your prime assets. Sears is becoming a smaller market company.

Fairly large holding and with all the negative news lately, should they sell for a decent capital gains with a big tax hit or wait for the $5 Dividend on Dec 6th? This depends on your time horizon. Heard a comment this morning that Sears US would be happy to get rid of all of Sears Canada. Based on this, he would be inclined to take the dividend and then sell your holdings.

Has underperformed the market. Business has been under a lot of pressure. At the right price, below $8, this gets interesting but he would stay away at these levels. A lot of real estate value, north of $12 a share. A lot of competition and having Target move in puts more and more pressure on.