Why Is Warren Buffett Doubling Down on This Failed American Icon?
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Why is Warren Buffett doubling down on this failed American icon? As you probably know, at one time Sears But what you might NOT know is this: was the largest retailer in the country. Warren Buffett predicted both the demise That is, until 1989, when Walmart blew of Sears and the failure of Eddie Lampert past it. And from there, Sears has back in 2005. Students at the University continued its slow spiral downward. of Kansas interviewed Buffett then. They asked him about Lampert’s attempt to And you may know that in 2004 Kmart turn Sears around. Here’s what Buffett Holdings Corp. purchased the Sears and told them: Roebuck Co. for $11 billion. They called the new company Sears Holdings Corp. Eddie is a very smart guy, but (Nasdaq: SHLD). putting Kmart and Sears together is a tough hand. Turning around a For a short time, the new company’s retailer that has been slipping for profits went up, peaking at $1.5 billion a long time would be very difficult. in 2006. But by 2010 profits had all but Can you think of an example of a dried up, and in 2016 Sears had lost over retailer that was successfully $10 billion dollars. turned around?” At the end of 2016, hedge-fund owner Buffett was right. Eddie Lampert stepped in to prop up Sears Holdings. His goal was to turn That’s why you may be puzzled to learn both Sears and Kmart around. that Buffett has now invested in Sears. Not once, but twice. Both with his own For a while, investors were excited. money and with Berkshire Hathaway’s. People were calling Eddie Lampert the next Warren Buffett. Is Buffett, like Lampert, trying to turn Sears around? Not at all. As is typical But, as it turns out, Lampert is no oracle. with Buffett, he sees a bigger play here, While Sears once had 3,500 physical and it’s one that Real Vision guest stores across the country, there are Jeremy Shoykhet has picked up on. now less than 500. And it seems that Shoykhet says Buffett’s pick is poised every few months Sears Holdings to gain 60% or more over the next announces more shutdowns. It’s a slow, 12–18 months. painful death for what was once one of Jeremy reveals both the pick and his logic the great American companies. for the 60% gain in this video. Of course, Sears’ stock followed suit. From a high of almost $150, it’s down to $1.23 today. If you’re like most Americans, you look back with some nostalgia on companies like Sears. In 1886, Richard W. Sears was a telegraph operator in North Redwood, Minnesota. Sears was always on the lookout for opportunity. And one day he found it. Sears was working the telegraph when he noticed a local jeweler being offered a shipment of watches on consignment, meaning that the jeweler would have to pay for the watches only if and when he sold them. For whatever reason, the jeweler refused. But Sears jumped on them and struck his own consignment deal with the watch manufacturer. Sears didn’t set up a retail shop or go door-to-door, however. Instead, he sold all the watches to his fellow station agents. Every single one. Sears was hooked. Within six months he quit his job and set up a mail-order business selling watches. He called the business the R.W. Sears Watch Company. Sensing bigger opportunity, Sears moved the business to Chicago the following year. Business boomed. Because he was selling so many watches, Sears started to get a lot of repair requests, so he advertised to hire a watch repairman. As luck would have it, he hired one named Alvah Curtis Roebuck. The two became fast friends. That’s how one of the most famous partnerships in American history – Sears and Roebuck – began. Of course, the duo went on from there to form a thriving mail-order business that would eventually become the biggest retailer in the country. Most people don’t know that Sears began as a watch company. And most people don’t know that there’s still a way to profit from what Richard W. Sears started way back in 1886. But Warren Buffett knows. That’s why Buffett bought two million shares of a Sears spinoff late in 2015. And it’s why Buffett’s company, Berkshire Hathaway, recently announced it would lend the same spinoff company a whopping $2 billion. Here’s the kicker… This Sears spinoff has nothing to do with selling watches or any other merchandise. It’s got nothing to do with mail order or even the internet. The Sears spinoff is all about real estate. You see, in June of 2015, Sears spun off a company called Seritage Growth Properties (NYSE:SRG). While Sears is dying, Seritage is thriving. And if Buffett’s investments are any indication, the best is yet to come. Seritage owns the prime real estate on which many Sears stores once sat. In fact, Seritage owns 249 such pieces of real estate. And while 80% of Seritage’s properties were once Sears locations, that number will soon change to 35%. Seritage is a landlord. It collects rent on some of the best real estate in the country. It’s set up as a REIT (real estate investment trust). REITs deliver income plus the potential for appreciation. Seritage has been paying dividends faithfully at 25 cents a share or better every quarter since it began. You may say that 25 cents a share is not all that exciting for a $50 stock. But what excites Real Vision guest Jeremy Shoykhet is Seritage’s prospects for massive growth. Shoykhet sat down in our Real Vision studios in New York on August 15, 2018 to record a video. In that video, he makes a compelling case for Seritage. When you do, you’ll see why Shoykhet feels that Seritage is set to grow by 60% or more in the next 12–18 months. You’ll also discover why he thinks Buffett put his own money into Seritage. And why Buffett instructed Berkshire Hathaway to put its money in, too. Shoykhet feels Seritage is pioneering the “next generation” of real estate, a model that’s allowing it to triple the rental rates formerly paid by Sears. Shoykhet thinks Seritage is misunderstood. And, as it turns out, it’s one of the most shorted stocks on the New York Stock Exchange. That leads to some compelling technical analysis, which Shoykhet expands on the video. It’s important to point out Shoykhet doesn’t think Seritage is a magic bullet. Nothing is. And he admits to one reason why Seritage is not for every investor. But, as he shows, all signs point to a 60%+ return in as little as 12 months. Get the technical analysis, plus the recommended target price and stop price by watching Real Vision’s interview with Shoykhet here. See you next week. Venture Capital in the United States has an extreme geographic bias. Mainly occurring in the following coastal cities. In 2017, three metro areas - San Francisco, New York and San Jose, California - took about two-thirds of the investment for the top 20 cities. It’s official. By one widely accepted definition, we’re now living through the longest bull market in US history. The S&P 500 marches on, now having gone a record 3,452 consecutive days without declining 20%. That beats the old record-holding bull market that ran from 1990–2000. The S&P celebrated last week by touching all-time highs for the first time since late January. Nothing can stop US equities lately: In the last few months they’ve shrugged off news of trade wars, the Trump investigation, emerging markets contagion, and a 20% plunge in Facebook (FB). It’s not just American stocks flexing their muscles. The US dollar is also ripping to 2018 highs, driven by the Federal Reserve’s monetary tightening. The Fed continues to raise interest rates, while most other central banks around the world are either standing pat or easing. As Real Vision subscribers know, the dollar is the “key to everything.” Dollars grease the wheels of global finance. When they are cheap and plentiful, markets tend to be calm and happy. But a rapidly rising dollar can cause a lot of pain, as any investor holding emerging market assets will tell you. Many EM currencies, like the Turkish lira and Brazilian real, are getting annihilated. EM stocks have been tough to own as well. The popular ETF VWO has tanked about 20% since January, putting it in official bear market territory. As any precious metals investor knows, a rising dollar is gold and silver’s worst enemy. True to form, gold has been bludgeoned lately. It has slipped 9% this year to 1½-year lows, and it broke below the key $1,200/oz. level last week. Things are even worse for silver, gold’s more volatile cousin. It has slipped to 2½ year lows and sits just 5% above the $14 lows it saw in early 2016. Cracking this level would mean 9-year lows for silver and would cap off one of the more stunning “round trips” in recent memory. Silver exploded out of the gates after the financial crisis, leaping from $14 in 2009 to about $50 in 2011. Seven years later, it has given back nearly every penny of those gains. Because they cannot be diluted by governments, gold and silver are known as “hard currencies.” They are alternatives to paper currencies like US dollars, which are created at will by the US government.