Wednesday, January 23, 2008

Paperstand (SHLD, SI, SLE)

The WSJ discusses Sears (SHLD), saying that the co confirmed that it will reorganize its operations into 5 major units in a bid to give mgmt teams more autonomy and control over their groups. Sears identified its real-estate holdings as one of those units. Investors long have speculated that Sears's chmn Ed Lampert may sell some or all of the co owned Sears and Kmart locations to raise capital and then lease them back from the buyer. The trouble is, the continuing credit crisis has sapped the value of residential and commercial real estate alike in recent mo’s. Credit Suisse ests the value of Sears' real estate has "declined materially" in recent months to nearly $4.7bn. CS analyst Gary Balter noted that motivation to sell Sears's real estate could be undermined by the costs of vacating some of Sears's least-desirable locations. Those costs could exceed the amount those properties would bring in a sale. Most of Sears's store sites are of "C" or "D" quality, meaning they are avg or below avg. "We still believe that Sears and Kmart have some excellent locations that will command premium prices should the co decide to sell," CS's Mr. Balter wrote in a research report. "However, the mkt has recently dropped significantly, and...there is a cost, not a benefit, to getting out of weak locations."

“Heard on the Street” column discusses US banks, saying that the Fed's tonic hasn't worked so far. Before the latest move, the Fed chopped rates by one percentage point -- and those reductions didn't appear to have a big immediate impact on bank lending. "It's not clear that this cut will have much of a stimulus, given that the previous cuts didn't have a significant effect," says Joseph Mason, of Drexel University. Of the many worries still facing banks, the biggest is that they will likely have to set aside more money than expected for soured loans on autos and credit cards. These loan-loss provisions soared in the 4Q, and this expense could be higher than bank execs are forecasting. "Banks are in complete denial about the losses that are coming," says Paul Miller, of FBR. Mr. Miller ests that large US banks could book $100-120bn in provisions.

Barron’s Online discusses Siemens (SI), whose shares, recently at $124, trade at a relatively modest 14x estd ‘08 earnings, giving the stock a PEG ratio of just 0.56. Siemens is the number one or number two player, globally, in most of its businesses. Indeed, it was the telecom business that got Siemens in hot water when it was revealed in ‘06 that the firm had paid hundreds of millions of dollars in bribes to win contracts in Saudi Arabia, Nigeria and Russia. Since then, top mgmt has been cleaned out, and last July Peter Loescher was brought in as CEO. John Maloney of M&R Capital Mgmt, who has been buying the stock, tells Barron's that he thinks Siemens could earn $12.73 per share by F’10. Another plus: The co said last yr that it would repurchase up to 10bn euros ($14.6bn) worth of stock by 2010, which could shrink the share count by 10% or more.

“Inside Scoop” section reprots that ValueAct Capital on Fri disclosed it now owns 36.2m shares, or a 5% stake in Sara Lee (SLE), making it the co's 3rd-largest shareholder. "It looks like the fund is out hunting for value again," says Lon Juricic, of "They are long-term investors who take large, concentrated positions in co’s. They are making a bet that going forward the co is worth more than what the mkt's pricing it."

According to the Barron’s Online, one healthcare fund holds: MHS, HOLX, ABT, SONO, TMO, AET, BAX, MRK and WLP.

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