market folly

Fairholme Capital's Bruce Berkowitz has released numerous case studies about his investments in the past and one of his latest features his investment thesis on his second largest position: Sears Holdings (SHLD).

In the past, we've also posted up Berkowitz's thesis on AIG (his largest position) as well as Fairholme's thesis on Bank of America.  His latest case study on Sears showcases the key pieces to the investment, including:

- Real Estate: vast property portfolio carried at low cost

- Operations: increasing cash flows through greater efficiencies and cost reductions

- Top Brands: revenue beyond Sears and Kmart

- Leadership: new team with proven success

- Liquidity: ample to meet all liabilities and opportunities

- Catalysts: changing winds


Fairholme's mantra is "ignore the crowd" and this investment certainly fits the bill.  Sears has been one of the more shorted names among hedge funds (who have piled on as the retailer struggles).  They simply wager that a turnaround is farfetched.

Berkowitz takes the other side of the trade and sides with Eddie Lampert, chairman of Sears (and a value hedge fund manager himself: ESL Investors/RBS Partners).  This presentation is intriguing mainly because it provides both a variant view for the short sellers and a long case for value investors.

Embedded below is Bruce Berkowitz's investment thesis on Sears via his case study:

For more from this investor, head to Berkowitz's checklist for investing.