Sears Canada Inc. (SRSC): Fairholme Further Raises Passive Stake

Bruce Berkowitz‘s Fairholme Capital Management has inched up its position in Sears Canada Inc. (NASDAQ:SRSC), as a new filing with the Securities and Exchange Commission showed. Fairholme disclosed ownership of around 13.76 million shares of the company, which represent 13.5% of the outstanding common stock. The stake has been raised from 11.86 million shares the fund reported in a previous filing.

Fairholme initiated a position in Sears Canada Inc. (NASDAQ:SRSC) at the end of October, soon after the company together with Sears Holdings Corp (NASDAQ:SHLD) launched rights offering to sell 40.0 million shares of Sears Canada to Sears Holdings’ shareholders. Fairholme is one of the largest shareholders of Sears Holdings Corp (NASDAQ:SHLD), owning around 25.51 million shares as of the end of September. A couple of months ago, Fairholme trimmed its position by selling around 26,400 shares at $26.19 per unit as the company has had some issues with liquidity. In addition, Fairholme has been in talks with Sears Holdings regarding a possible short-term loan.

Sears Canada Inc. (NASDAQ:SRSC)’s stock fell by around 25% since the beginning of the year. The retailer has had a decline in its revenues which slid to around $835 million for the third quarter, ended October 30, from $982 million a year ago, while its net loss expanded further to $1.16 per share, from $0.48. On the back of disappointing results, aside from the stock losing ground, analysts are also not very optimistic about the company’s prospects, as the current consensus rating for Sears Canada Inc. (NASDAQ:SRSC) is ‘Hold’.

Another big shareholder of Sears Canada Inc. (NASDAQ:SRSC) is Edward Lampert‘s ESL Investments, which acquired 28.16 million shares at the beginning of October, and over the last month further increased its position in the company to approximately 50.44 million shares. Edward Lampert also serves as the CEO of Sears Holdings Corp (NASDAQ:SHLD) and in September ESL agreed to provide a short-term loan worth $400 million.

Mr. Berkowitz is one of the most famous investors on the street, who achieved the “Stock Manager of the Decade” title from Morningstar back in 2010.  Fairholme is a mutual fund with around $19 billion in assets, which managed to return on average around 12.9% per year for the past decade, while in 2010, Fairholme Fund returned more than 25%, beating the S&P 500 by a significant margin. In an interview in September, the manager of Fairholme said that he prefers to focus on a less diversified portfolio, because he prefers to invest in companies that he is most comfortable with.

Disclosure: none