How to Use Your New Sears Stock Now That Fairholme’s Bruce Berkowitz Is Out

October 18th, 20177:11 am @

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Sears or a sandwich?

Fairholme Capital Management LLC investment chief Bruce Berkowitz has stepped down from the board of Sears Holdings Corp. (SHLD) . He has also decided to distribute some of the 28,012,172 Sears shares Fairholme holds to the investors of soon-to-be-dissolved Fairholme Partnership hedge fund.

While all of Fairholme’s vast array of funds, which includes Berkowitz’s holdings and those of his family plus many hedge funds similar to Fairholme Partnership, hold over 28 million shares of the ailing retailer, only about one million shares of Sears will be leaving the Fairholme umbrella of funds in this move.

In a Securities Exchange (SEC) filing from Friday, Oct. 13, Fairholme said it would return shares to the dissolved fund’s investors. While most of those shares were redistributed to other stock and mutual funds within Fairholme, 897,514 shares of Sears are “leaving the Fairholme tent,” a Fairholme spokesperson told TheStreet.

While it’s worth noting that “Fairholme has not sold a share of Sears in 2017,” according to the spokesperson, Fairholme no longer has beneficiary ownership over those 897,514 shares of Sears liquidated from Fairholme Partnership.

With almost one million Sears shares soon in the hands of investors who put their money behind Berkowitz’s shuttered hedge fund, freshly minted owners might be wondering what to do with their shiny new assets. TheStreet came up with a few suggestions besides holding onto the stock. After all, the outlook for Sears is far from certain…

Your local Sears?

For example:

  • One share of Sears, trading at $5.68, could buy you four breakfasts from McDonald’s Corp. (MCD)  assuming you’re a fan of Sausage McMuffins.
  • Three shares, worth $17.04, could grab a share of Ford Motor Co. (F) . The automaker is old, but rampant cost-cutting plans from new CEO Jim Hackett could bring profit gains down the road.
  • Five shares, worth $28.40, could purchase two shares of semiconductor manufacturer Advanced Micro Devices Inc. (AMD) . Get in on the upward momentum from this hot tech sector before it’s too late. An investment in semis might be far better than standing on a sinking ship and holding five Sears shares.
  • Fifteen shares, worth $85.20, could grab you a share of Microsoft Corp. (MSFT) . This company has made important gains in the cloud services business, even besting old-tech rival International Business Machines Corp. (IBM) as the best long-term cloud bet.
  • 50 shares of Sears, worth $284, could buy you and your date a swanky Brazilian steak dinner at Fogo De Chao Inc. (FOGO) , plus a bottle of wine. Take our word, this trade is well worth it.
  • 100 shares, worth $568, comes close to getting you three shares of Nvidia Corp. (NVDA) . With a few extra bucks, you could spend your money much more wisely. If TheStreet’s own Jim Cramer named his dog after a stock, we think it’s worth holding.
  • 200 shares, worth $1,136, could snag one Amazon.com Inc. (AMZN) share. Even one share of the e-commerce giant is better than holdings Sears, since Amazon is forging a path in artificial intelligence, web services and even grocery stores. Cramer said it’s one company that “always seems to know what you want next.” Sears, however, isn’t.
  • 1,000 shares, worth $5,680, gets you 35 shares of Apple Inc. (AAPL) . Take the Apple and run.

There you have it, a list of better equities (and sandwiches) to own than Sears. Even after the distribution, Fairholme will own 26.1% of Sears stock. Only Sears Chairman Eddie Lampert holds more shares of the retailer. Here’s to wondering what they’ll buy if they can sell all those shares.

Nvidia and Apple are holdings in Jim Cramer’s Action Alerts PLUS Charitable Trust Portfolio . Want to be alerted before Cramer buys or sells NVDA and AAPL? Learn more now.

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Article source: https://www.thestreet.com/story/14345985/1/berkowitz-fairholme-sears-stock-liquidated.html