Billionaire Eddie Lampert Bought More Sears From His Hedge Fund

Target and Wal-Mart are much more stable retailers. Profitable, both companies trade at 15 times their trailing earnings. They’ve also both reported revenue growth in their most recent quarter compared to the same period in the previous year, though some reports have said that Wal-Mart has started the current fiscal year off very weak and we’d imagine that if that is the case than Target may be struggling as well.

It’s also interesting to compare Sears to the similarly troubled J.C. Penney Company, Inc. (NYSE:JCP), which has its own billionaire hedge fund manager backing it in the form of Bill Ackman of Pershing Square. JC Penney recently reported very disappointing results, which has put a good deal of pressure on Ackman who has also had to deal with increases in price at his high profile short Herbalife Ltd. (NYSE:HLF). See more stocks Ackman likes. JC Penney is also expected to be unprofitable for the next two fiscal years and also has high short interest.

Lampert is taking a more direct stake in Sears, but we’re still seeing a decline in revenue- even while Target and Wal-Mart continue to grow their sales. The often optimistic sell-side actually expects the earnings per share picture to be worse in two years, after which time e-commerce will presumably have taken even more market share from physical retailers. We doubt that stores like Sears and JC Penney will have much latitude for recovery for that environment as they simply will not be able to compete on price and rebuild profits. As a result we would avoid Sears for now.

Disclosure: I own no shares of any stocks mentioned in this article.