Playing Jenga With Sears Holdings Corporation (SHLD)

Spin-offs: the bad

On the flip side of Sears Hometown and Outlet Stores Inc (NASDAQ:SHOS), Orchard Supply Hardware Stores Corp (NASDAQ:OSH) has plunged from a similar $30 all the way to $1.40 due to the Chapter 11 bankruptcy filling. Orchard Supply operates neighborhood hardware and garden stores with 89 of them in California. The expectation was that the spin-off from the parent would allow the home improvement store to thrive. Instead, the company was never able to overcome the large debt load and larger competitors in the state.

While filing for bankruptcy, the stock is suddenly in play due to the announcement that Lowe’s Companies, Inc. (NYSE:LOW) wants to purchase a substantial portion of the assets. Lowe’s wants to acquire at least 60 of the stores for $205 million in cash, plus the assumption of payables owed to nearly all of Orchard’s supplier partners.

For risky investors, Orchard Supply might be worth a shot that another company will increase the bid for the valuable real estate locations, but it is more for gamblers and not ideal for investors. The Lowe’s offer amounts to roughly $3.5 million per store, suggesting a higher bid might pop up.

Bottom line

No doubt should exist that Sears Holdings Corporation (NASDAQ:SHLD) continues to control plenty of assets to continue playing Jenga without causing the structure to collapse. The massive real estate  assets and valuable brands will eventually be worth vastly more than the $5 billion awarded to a market focused on the lackluster retail operations.

The previously spun off assets have had mixed results for investors. Sears Hometown and Outlet Stores Inc (NASDAQ:SHOS) shows potential for rewarding investors as the real estate market rebounds and the company benefits from rising demand for appliances, tools, and garden supplies. Ultimately, the parent continues to control a vast amount of assets that exceeds the value of the stock, making it very appealing at these levels.

Mark Holder and Stone Fox Capital Advisors, LLC own positions in Sears Holdings. The Motley Fool has no position in any of the stocks mentioned.

The article Playing Jenga With Sears Holdings originally appeared on Fool.com and is written by Mark Holder.

Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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