market folly

Bruce Berkowitz's firm Fairholme Capital just filed a 13D with the SEC regarding shares of Sears Holdings (SHLD).  Per the filing, Fairholme now owns 24% of SHLD with over 25 million shares.

This means Berkowitz has added to his position size by over 850k shares since the end of the second quarter.  He's been a long-term Sears shareholder and shares have nosedived from $45 earlier in the year down to current levels of under $27.

The vast majority of this decline has been in recent days as news came out that the company was borrowing $400 million from its CEO Eddie Lampert's hedge fund (ESL Investments).  This has prodded fears that the company could eventually be in trouble.

Berkowitz was buying in early September around $32.28 but then ramped up purchases on September 5th and 8th around $33.21. It will be interesting to see if he ramps up his purchases even further now that shares are even lower.

Fairholme's filing also notes that one of their other investments is potentially involved here: St. Joe (JOE).  The filing indicates that, "The St. Joe Company, an affiliate of the Fund and Fairholme, is in discussions with the Issuer regarding the $400 million secured short-term loan disclosed on the 8-K filed by the Issuer on September 15, 2014.  The St. Joe Company may invest up to $100 million in participations relating to theShort Term Loan."

Berkowitz's 13D filing didn't note any other plans or proposals at this time.


Per Google Finance, Sears Holdings is "is a retailer with 2,172 full-line and 1,338 specialty retail stores in the United States operating through Kmart Holding Corporation (Kmart) and Sears, Roebuck and Co. (Sears) and 500 full-line and specialty retail stores in Canada operating through Sears Canada Inc. (Sears Canada), a 95%-owned subsidiary. The Company operates in three segments: Kmart, Sears Domestic and Sears Canada."