Not many believed Sears Holdings' Edward Lampert when he said he wanted to return Sears and Kmart to their glory days as retail chains. Most, it's pretty safe to say, were looking for Mr. Lampert to liquidate the company, selling off its vast real estate holdings and smile with investors all the way to the bank.
Now, it appears as though Mr. Lampert may have been telling the truth all along.
Despite both chains continuing to lose market share, Mr. Lampert seems intent on turning the businesses around. That is precisely why Michael Winer, portfolio manager of Third Avenue Real Estate Value Fund, is pulling his fund's investment from the Sears Holdings.
According to a report in the Chicago Tribune, Mr. Winer believes Sears Holdings "should be valued as a going concern, as opposed to the theoretical liquidation value."
Third Avenue's moves are of interest to other investors in the company because it was the fund that joined with Mr. Lampert in 2002 to gain control of Kmart.
Last year, the fund sold most of the 2.25 million shares it owned in Sears Holdings because of the high price of the stock and because of its acknowledgment that Mr. Lampert and company's plans to resurrect the retailers was "far from assured."
Biff Ruttenberg, president of Atlas Partners LLC, is among those who have come to the conclusion that "Eddie Lampert may have been shooting straight. He won't turn it into a real estate play. That's Plan B. Plan A is, let's run a retail business. If he can't run it profitably, he's got a back door."
Mohnish Pabrai, managing partner at Pabrai Investment Funds, doesn't see Mr. Lampert turning around Kmart and Sears.
"If you don't buy into the story that Sears can turn around, you're betting on real estate or on Eddie's abilities as a master capital allocator," he said. "I think the real estate values for Lampert give him a huge margin of safety."
Discussion Questions: Have you changed your mind on whether or not Edward Lampert is serious about returning "Sears and Kmart to the position of prominence that both brands and companies held in American retailing"?