How Can Publish This Story?

In a piece written by Glenn Hall, published an article today entitled “Today’s Outrage: Sears Isn’t Worth $4 Billion.” I had to check my calendar to make sure it wasn’t April 1st because I can’t believe the editors at a prominent site would publish this nonsense.

Here is how the article begins:

“How can Sears be worth $31.84 a share? Target fetches only $29.54, and JC Penney is down to $16.55. At the other end of the retail spectrum, investors are only paying $6.41 for Macy’s, and at the low end, Family Dollar Stores are only trading at $26. Wal-Mart is one of the few higher-valued competitors, with its shares at $53. So I have to ask: Who thinks Sears is better than Target or even JC Penney for that matter?”

I would expect this from a market novice who does not understand that share prices themselves do not indicate which companies are “better” than others (the number of shares outstanding, and therefore the equity market values, are different). But from I think Jim Cramer needs to have a talk with his editors over there.

I was planning on writing about Sears today, and will still do so later, but I just had to point this out for those of you who are often a little too quick to act on something you read online. It has become very easy to reach the online masses with one’s views these days, given technological advances, but as a result the quality of the content is diluted, and perhaps even more so than I thought.

Full Disclosure: Peridot was long a small position in SHLD at the time of writing, but has been selling the stock steadily over the last couple of years, for reasons which will be explained in an upcoming blog post. Positions may change at any time.

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5 Thoughts on “How Can Publish This Story?

  1. Canada-US MBA on December 2, 2008 at 9:52 AM said:

    I emailed the author to let him know I was stunned that it appeared he doesn’t understand the difference between market cap and share price. Here is his response:

    Thank you for the feedback.

    I am arguing relative value on the share price comparisons not on market
    cap. I don’t think investors paying more than $30 a share for Sears will
    see much return on investment. Macy’s represents more upside at $6.87

    On Market Cap, I don’t think Sears is worth $30 a share, so I don’t
    think the company is worth the $4 billion value that represents. While I
    used total market value for Sears in the headline, I am not comparing
    market caps in the analysis of relative value.

    All the best,

    Glenn Hall
    phone: 212 321 5251

  2. Chad Brand on December 2, 2008 at 10:01 AM said:

    Wow, he IS the editor??!!

    His response proves he actually thinks one can judge relative value simply by looking at share price. Macy’s has more upside than Sears simply because it trades at $6 instead of $30? Maybe it has exactly 5 times the upside too since 30 divided by 6 is 5!

    I guess I’m being too hard on the guy, but it’s unreal.

  3. shepherd on December 2, 2008 at 4:23 PM said:

    You’re not being too hard on the guy. You may be singling him out of the countless number of utterly clueless people who make their living giving financial advice, but you are not being too hard.

  4. SpeakToMe on December 3, 2008 at 8:52 AM said:

    Looks like SHLD is no longer in Cramer’s portfolio. I was going to cut the author some slack for being brave — not necessary.

  5. While I am no fan of Sears I do not agree with the author’s assertion. Sears is worth over 9 billion in equity alone based on its balance sheet. Sears has a vastly superior balance sheet to Macy’s. Sears has a stronger cash position and less debt than Macy’s

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