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Sears Holdings Corp (SHLD): Bruce Berkowitz’s Fairholme Trims Stake as Liquidity Concerns Linger

Bruce Berkowitz’s Fairholme (Fairx) disclosed today a decrease in its exposure to Sears Holdings Corp (NASDAQ:SHLD). Over the past couple of days, Fairholme sold 26,400 for an average price of $26.19 per share. The mutual fund last acknowledged ownership of 25.5 million Common Shares, down from 25.53 million declared on September 18, but up from the 24.67 million held by the end of the second quarter of 2014. This position accounts for 25% of Sears Holdings Corp (NASDAQ:SHLD)’s Common Shares outstanding.

The fund had disclosed, a few days ago, that The St. Joe Company (NYSE:JOE), a Fairholme affiliate, was in discussions with Sears Holdings Corp (NASDAQ:SHLD) concerning possible participation in the $400 million secured short-term loan disclosed on September 15, 2014. Probably in relation with this matter, the fund changed the nature of its stake in Sears, from a passive to an activist one.

FAIRHOLME (FAIRX) Bruce Berkowitz

However, The St. Joe Company (NYSE:JOE) was unable to reach an agreement regarding the terms for such a participation in light of its investment criteria and ended up declining the opportunity to participate. Nonetheless, The St. Joe Company (NYSE:JOE) and Fairholme are in discussions concerning a substantially smaller participation in the Short-Term Loan (SEC).

Sears Holdings Corp (NASDAQ:SHLD) has been quite weak lately, from a financial standpoint. “Our second quarter earnings are unacceptable and we are taking steps to address our performance on several levels,” assured Edward S. Lampert, Chief Executive Officer and Chairman, recently.

Today, the company said that its Canadian division’s CEO, Douglas C. Campbell, has resigned. Investors should be concerned about this, as Sears Holdings Corp (NASDAQ:SHLD) planned to sell its stake in Sears Canada to fund its liquidity needs. However, it hasn’t been able to reach the bid it is looking for, until now. The stock is down 2.8% today, and more than 47% year-to-date, as the company continues to post poor results, and shrink its operations.

Fairholme is a mutual fund founded by Bruce Berkowitz in 1999, and managed by him ever since. Fairholme Fund managed to return, in average, 12.9% per year since September 2000, having beat the market every year (except for 2003). As Mr. Berkowitz explained recently, Fairholme’s portfolio is less diversified than others, because he prefers to invest in companies that he knows about, and feels most comfortable with. This strategy has guided the fund’s investments since its inception.

Disclosure: Javier Hasse holds no positions in any stocks or funds mentioned

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