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Why Sears Holdings Corporation Stock Skyrocketed 46.6% in March

By Steve Symington - Apr 10, 2017 at 2:23PM

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And what investors in the struggling retailer can expect going forward.

What happened

Shares of Sears Holdings Corporation (SHLDQ) jumped 46.6% in the month of March, according to data provided by S&P Global Market Intelligence, after the ailing retailer's largest shareholders increased their positions in the stock.

So what

That's not to say Sears' entire month was a pleasant ascent for investors. Shares plunged more than 13% on March 22, 2017, after the company formally acknowledged it is at risk of filing for bankruptcy, stating in its latest 10-K filing that "substantial doubt exists related to the company's ability to continue as a going concern."

Over the subsequent week, however, shares repeatedly popped after separate SEC filings showed that CEO Eddie Lampert and Fairholme Capital Management's Bruce Berkowitz significantly increased their respective stakes in the company, with each buying hundreds of thousands of shares on the open market in an apparent attempt to take advantage of the plunge.

Exterior of a Sears store

Image source: Sears Holdings.

Now what

To be fair, Sears also argued in its 10-K that its risk of bankruptcy would be mitigated by is ongoing turnaround initiatives, which so far include closing dozens of underperforming locations, selling brands like Land's End and Craftsman, a restructuring effort targeting at least $1 billion in annualized cost savings this year, and ambitious debt-reduction efforts.

That's not to say Sears is suddenly a risk-free stock, as there remains plenty of work to do. But combined with the votes of confidence represented by these big insider purchases -- and keeping in mind I'm content continuing to watch from the sidelines -- it's hardly surprising to see shares of Sears rebounding from multiyear lows in February.

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