Buffett Still A Buyer, Will Seritage Shares Go Higher?

It’s quite clear that Buffett owns shares in Seritage for value creation, and if Sears is able to hang on another three of four years, Seritage investors may be quite happy.

Summary

  • Sources have written a Sears bankruptcy would likely happen in late 2017.
  • If Sears were to file bankruptcy, Seritage's current signed third-party income is not sufficient to cover its interest expense.
  • There are shrinking options for Sears, and Seritage’s balance sheet makes it difficult to execute on the value creation blueprint.
  • The odds are not good, and the upcoming holiday season will serve as a barometer as to whether Sears makes it through the first half of 2018.

A few days ago, CNBC’s Lauren Thomas (my daughter) reported that, “Bruce Berkowitz is leaving Sears Holdings' (NASDAQ:SHLD) board of directors, effective Oct. 31st”. She added:

“Berkowitz, who serves as the chief investment manager of Fairholme Capital Management, joined Sears' board in February of last year. His relationship with the retailer's chief executive, Eddie Lampert, dates back much further, though.”

In a statement, Berkowitz said:

"I wish the company and its associates all the best as Sears Holdings continues to execute on its strategic priorities."

According to filings, “Berkowitz took his first stake in the department store retailer in late August 2005, through his Fairholme Fund," and according to Thomas, “The fund, managed by Berkowitz, peaked in 2011 and has since tumbled as Sears shares have fallen.”

Berkowitz has also invested in Seritage Growth Properties (NYSE:SRG), the $2.8 billion retail REIT that was spun out of Sears Holdings in July 2015 and owns primarily Sears and Kmart boxes. According to Thomas:

“In 2010, fund-research firm Morningstar named Berkowitz U.S. stock fund manager of the decade. But his credibility in picking investments has since declined as his fund's performance has waned.”

If You Smell Smoke…

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