Consider the following scenario: A great company faces a languishing stock price. A few quarters of managerial efforts fail to revive profits. The stock continues to decline. As a result, the CEO is ostracized for having lost his ability. Sound all too familiar?
During the Internet era, this exact scenario was being exacted on Warren Buffett. Buffett's company, Berkshire Hathaway
Those who forget history ...
We know how the story played out for Berkshire. Those who stuck alongside Buffett -- and there were many -- continue to be rewarded. Of course, Berkshire will probably never deliver the same returns as when it was much smaller, but Berkshire -- at the right price -- should continue to outperform the market.
Those who continue to kick themselves for abandoning Buffett may have a second chance, though. Eddie Lampert, hedge-fund-manager extraordinaire, is currently trying to right the ship at Sears Holdings
... are often doomed to repeat it
But Lampert seems intent on trying to fix Sears, as he has recently announced his plans to divide the company into five divisions. But the retailing business is tough. You constantly have to adapt to consumer tastes and competition from all sides. Yet those who are looking at Sears from only the retail side might be missing the bigger picture.
Eddie Lampert is a brilliant capital allocator. It's been said that after he left Goldman Sachs
You're in good company
Some very shrewd investors are heavily invested in Sears because of their confidence in Lampert. Bill Ackman of Pershing Square and Bill Miller at Legg Mason have built up positions. Most recently, value investor Mohnish Pabrai reported a position in Sears. Pabrai's investment in Sears is notable, because he typically avoids investing in retail businesses. So I doubt very much that Pabrai sees Sears as merely a retailer.
Amid the weakness in its business operations, there are a lot of positive indicators suggesting Sears will create value over the long term. The big bet right now is on Lampert. His past endeavors suggest that it's not a wise bet to go against him. As always, do your own work on this one, but it certainly doesn't hurt that a lot of smart and savvy money would be invested alongside you, should you decide to buy.
Berkshire Hathaway is a recommendation of both the Motley Fool Stock Advisor and Inside Value newsletters. Sears and Legg Mason are Inside Value recommendations. Yahoo! is a former Stock Advisor recommendation. Take a free trial to any of our newsletters here.