October 12, 2011
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of retailer Sears Holdings (Nasdaq: SHLD ) have been rallying since the get-go, up as much as 11% at one point today despite no company-specific news.
So what: Retail sales at Sears have been weaker than many of its peers, so it’s not a shock that Sears Holdings boasts a very large number of short-sellers. As of Sept. 15, according to The Wall Street Journal, 47% of Sears’ float was currently held by short-sellers, making it quite possible that today’s rally is being fueled by increased short covering.
Now what: I’d be taking today’s move higher with a grain of salt because short-covering rallies often have short-term price effects on a stock. After rebounding more than $20 off its 52-week lows, Sears is valued at roughly 90% of its book value. Then again, the company is forecasting losses at least through 2012 and has been losing ground to Home Depot (NYSE: HD ) , Wal-Mart (NYSE: WMT ) , and Lowe’s (NYSE: LOW ) . What many perceive as a value could actually be a value trap, and I’m inclined to stay far away from Sears.
Craving more input on Sears? Add it to your free and personalized watchlist to keep up on the latest news with the company.