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Holly LaFon
Holly LaFon
Articles (9485)  | Author's Website |

Bruce Berkowitz Axes 67% of Sears Holdings Stake

Fairholme continues exit as company files for bankruptcy

October 22, 2018 | About:

Bruce Berkowitz (Trades, Portfolio), one of the primary investors in Sears Holdings (SHLD), which announced its intention to file for bankruptcy last week, has sold some 67.44% of his stake in the company, according to a filing released Friday.

Berkowitz, who once sat on the board of the ailing retailer, reported owning only 4,578,440 shares of the company, a position diminished from 14,061,947 shares he owned at last count on Aug. 28. The sale represents the largest decrease he has made in the position in at least the past nine years on record. At peak, his holding topped 28.9 million shares in the first quarter of 2017.

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The investment has done some damage at Berkowitz’s firm, Fairholme Capital Management, with the investor saying in January that it “wrecked the funds’ performance.”

“Sears realized billions of dollars from asset sales, as we predicted, but I did not foresee the operating losses that have significantly reduced values,” Berkowitz wrote in a shareholder letter. “Getting the asset values largely correct, but missing the company’s inability to stop retailing losses, has been hugely frustrating and fatiguing for me to watch.”

Berkowitz’s latest filing is dated Oct. 15, the date Sears announced it had filed for Chapter 11 bankruptcy pursuing a turnaround in a competitive retail environment since 2009 under the watch of its hedge fund manager CEO, Eddie Lampert. Despite closing 142 unprofitable stores and selling more assets as part of its restructuring, the company said that it plans to stay in business and wants to use the bankruptcy to “accelerate its strategic transformation.”

Lampert discussed the failed turnaround in a New York Times profile published Sunday, in which he cited an inability to keep up with retail’s digital revolution and inability to raise enough money as principal inhibitors of success. Lampert told the paper, “I’m not fine with the outcome, but I’m fine with the effort.”

Investors still holding on to Sears lost even more on Monday, when the stock’s price tumbled 9.27% to 42 cents per share, against a 0.45% decline in the S&P 500. Sears has declined almost 88% year to date. At their highest, shares of the historic retailer traded above $130 in 2007.

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Berkowitz has noted in shareholder letters that he has far less exposure to Sears in his three main funds than he did in years past. Of his remaining shares, 2.4 million are owned by the Fairholme Fund (Trades, Portfolio) and 373,898 are held in his Fairholme Allocation Fund.

As he has dialed back on Sears, Berkowitz started three fresh positions in the second quarter, buying AT&T (NYSE:T), Spectrum Brands Holdings (NYSE:SPB) and Vista Outdoor (NYSE:VSTO).

See Bruce Berkowitz (Trades, Portfolio)'s portfolio here.

Read more here: 

Sears: What Went Wrong?

Sears Is Now Under $1; What I Said About It Two Years Ago in My Book “Invest Like a Guru”

Bruce Berkowitz’s Sears Falls Below $1

About the author:

Holly LaFon
I'm a financial journalist with a Master of Science in journalism from Medill at Northwestern University.

Visit Holly LaFon's Website


Rating: 4.7/5 (3 votes)

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Comments

snowballbuilder
Snowballbuilder - 4 months ago    Report SPAM

"The investment has done some damage at Berkowitz’s firm, Fairholme Capital Managemen"

I think You are a bit underestimating the problem... like saying the iceberg has made SOME Damage to the Titanic....

exit at 50 cent / share a position that has a cost around 50 - 60 $ (dollar not cent) / share losing around 99% is a big problem.

If these position is also (at cost) your biggest investment the big problem become a disaster.

The total losses (more than 1 billion probably close to 1,5 billions) is bigger than the total value of the fund today.

But there is even more... he has started investing in sears in 2005 and holding the position(for 13 years) untill the substantial bankruptcy loosing an entire big bull market and disinvesting other position BAC an AIG while holding sears (despite numerous and big red flags) to the end of the world.

He has bet the entire house on the wrong investment

In my opinion thats not a tipe of error you can recover from.

Just some thoughts best snow

Holly LaFon
Holly LaFon premium member - 4 months ago

Good points, thank you!

stephenbaker
Stephenbaker - 4 months ago    Report SPAM

Echo Snow's comments. He is likely completely out of the stock by now. Worse yet, he evidently still hasn't learned from his mistake, as evidenced by his largest FAIRX equity holding (by far) - JOE. This hasn't been the disaster that SHLD has been, but its history reflects little to no success and it has more future questions than answers. Where is the catalyst that will drive JOE's earnings going forward?

Cowboy77
Cowboy77 - 4 months ago    Report SPAM

I sold Fairholme a few years back after it became apparent that Berkowitz was a bit loopy. He hired his brother-in-law who turned out to be a "less than honest" guy. And I'm being kind here.

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