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Thread: 10 possible store closings in 2010

  1. #46
    Danger is my business! oneupper's Avatar
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    Re: 10 possible store closings in 2010

    Quote Originally Posted by redsfandan View Post
    Almost 10 years ago KMart stock was trading around $2. A few years later Sears bought them when KMart stock was around $100. The wisdom of the Sears decision to buy KMart can be debated. But the reward of the investors who bought KMart stock, the last time KMart wasn't doing so well, and held onto that stock for a few years can't be dismissed. This is why I'm curious if the stock of any of these companies is worth buying for the speculative part of a portfolio.
    Not quite so. Kmart went into Chapter 11 in 2002. The old shares were wiped out and the bondholders became the owners of the "new" Kmart shares.
    Hedge Fund manager Eddie Lampert who had accumulated Kmart bonds, basically took over the company and decided to run it instead of flipping it.

    True, the stock then went on a run rising 10 or 20 fold until peaking in 2007, but these were the new shares (converted bonds).

    Kmart bought Sears in 2005.

    Kmart still sucks, but when its debt was erased (converted to equity), it gained a new lease on life. Bad or mature businesses can survive if not overleverged. You can see it in the newspapers. Tribune Co went into Chap 11 mostly because of Sam Zell's LBO. Gannett (USA Today) is simply cutting back on paper and people and still turns a profit.

    Debt makes you die quicker.
    "A person is smart. People are dumb, panicky, dangerous animals and you know it."

    http://dalmady.blogspot.com


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  3. #47
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    Re: 10 possible store closings in 2010

    I was wrong on a few points about KMart but I wasn't wrong on the main point. That it's possible that one or two of these companies that aren't doing so well right now could turn out to be a good stock to buy low.


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