Sears may be Eddie Lampert’s Waterloo, a bold gamble that proves his ultimate undoing after more than a decade spent (and spending) trying to keep the all-American retailer alive and relevant. Bruce Berkowitz thinks it may be his Waterloo, too, but in his telling of the story he gets to be Wellington instead of Napoleon.
As of the end of February, more than 10% of the fund was invested in Seritage shares, Sears and appliance seller Sears Hometown and Outlet Stores Inc. stock and various Sears entities’ corporate debt, according to the filing. The fund’s holdings also include warrants to purchase Sears common stock.
Mr. Berkowitz has been adding to his Sears exposure in recent years as its stock price has declined. This year, Sears shares have fallen 14%.
But don’t you see? That’s right where he wants them!
He believes restaurants are returning to malls, but in the form of outdoor eateries. Mr. Berkowitz said traditional clothing chains may die, but their space will be replaced by movie theaters and auto showrooms. As online retailers reshape shopping, he says the parking lots and properties traditional retailers occupied will be redeveloped and used for new services or homes.
When that happens, he says anchor properties will have heightened value given their footprint and location. And, Sears often inhabits the largest corner of malls.
As Berkowitz sees it, that all adds up to a $90 stock, a bold claim for something that’s currently trading at $8.50 thanks to a week-long rally that’s boosted it by a third. It might not be enough to save Lampert, but it may be just the ticket for Berkowitz to win back his good name.
Mr. Berkowitz says one part of his comeback—big bets on government-backed mortgage financing giants—could pay off in the next six months.
Treasury officials have said they want to reform Fannie Mae and Freddie Mac, which could include moving them out of government control. Such a move could put an end to litigation over their future and deliver a windfall to investors. For now, however, the future of the two entities and what that will mean for investors is unclear.