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Why Sears Holdings, Chuy's Holdings, and RLJ Lodging Trust Jumped Today

By Dan Caplinger - Jul 17, 2017 at 4:27PM

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These stocks climbed on a quiet day. Find out why.

The stock market was relatively flat on Monday, as minute losses for the S&P 500 and Dow Jones Industrials took the benchmarks off their all-time highs from Friday. Positive economic news from China helped international stock markets carry forward the momentum that last week's record performance for U.S. stocks started, but falling oil prices and nervousness about the beginning of earnings season held back stocks closer to home from pushing further into uncharted territory. That didn't stop some individual companies from giving investors good news today, and several posted strong gains. Sears Holdings (SHLDQ), Chuy's Holdings (CHUY -1.19%), and RLJ Lodging Trust (RLJ 1.93%) were among the best performers on the day. Below, we'll look more closely at these stocks to tell you why they did so well.

Sears gets some financing

Shares of Sears Holdings climbed 12% after the ailing department store retailer got a new loan from a key stakeholder. Sears CEO Eddie Lampert operates ESL Partners, a hedge fund that has previously made substantial investments in Sears and other retailers, and the fund agreed to give Sears a loan for another $200 million. The move is the latest sign of Lampert's ongoing confidence in Sears, and it also gives the retailer more time to get things moving in the right direction. The terms of the loan reflect the risk involved, carrying a 9.75% interest rate and maturing in just five months. Even with new strategic moves like a fresh slate of store closures, many investors doubt that Sears will be able to avoid bankruptcy in the long run.

Sears store electronics section.

Image source: Sears.

Chuy's gets a good review

Chuy's Holdings stock picked up 7% after getting favorable comments from a well-known stock analyst company. Professionals at Raymond James upgraded shares of the Tex-Mex restaurant chain from market perform to outperform, setting a price target of $29 per share on the stock. The analysts noted that Chuy's shares have lost considerable ground lately, setting up an attractive value proposition and boosting the upside if things go well for the restaurant company. They also think Chuy's could be a target for a buyout bid, asserting that the shares have a reasonable valuation and the company has a stronger history than many of its restaurant peers. Times remain tough in the restaurant business, and Chuy's second-quarter results could reflect continued weakness. Yet with new locations opening in the Chicago and Denver areas, Chuy's continues to grow across the nation and carry its unique approach to new customers.

RLJ receives a bid

Finally, shares of RLJ Lodging Trust rose 8%. Investors in the hotel real estate investment trust had thought that it was destined to merge with industry peer FelCor Lodging Trust (NYSE: FCH) in a $7 billion merger. Yet RLJ revealed that it had gotten multiple offers in recent weeks from a private equity firm that was interested in exploring a buyout bid of its own. Offers were as high as $25.50 per RLJ share, although none was binding. RLJ turned down all of the private equity firm's advances, arguing that they weren't superior to the FelCor merger bid. Even if the bid doesn't amount to anything immediately, it does signal that interest in the hotel REIT sector is strong, and a future merger or acquisition could occur even if a potential RLJ/FelCor merger falls through.

Dan Caplinger owns shares of Chuy's Holdings. The Motley Fool owns shares of and recommends Chuy's Holdings. The Motley Fool has the following options: short October 2017 $30 puts on Chuy's Holdings. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Sears Holdings Corporation Stock Quote
Sears Holdings Corporation
SHLDQ
Chuy's Holdings, Inc. Stock Quote
Chuy's Holdings, Inc.
CHUY
$22.50 (-1.19%) $0.27
RLJ Loding Trust Stock Quote
RLJ Loding Trust
RLJ
$13.22 (1.93%) $0.25

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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