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One of the rationales for investing in Sears Holdings Corp. from the beginning of controlling shareholder Eddie Lampert's ownership has been the real estate play. The stores themselves were supposed to have unrecognized value even if the retail business was performing poorly.

It's time for that theory to be tested, argues Ken Kurson, financial columnist for Esquire magazine. He says the only value at Sears and Kmart, the company's two retail chains, "is the bet against them."

"I believe that there's an excellent chance that within a year SHLD will trade for half of what it trades for today," Mr. Kurson wrote as the shares sat at $70 (U.S.) earlier this summer, adding that he has shorted the stock "from time to time." (Sears Holdings closed Tuesday at $59.89.)

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More bluntly, Mr. Kurson says "I also believe that within a year, Sears and Kmart will no longer exist as freestanding stores. And that will be a damn shame."

The troubles at Sears and Kmart are well known, with declining sales and market share. (Sears Canada, which Sears Holdings also controls, has fared better).

Mr. Lampert has supported Sears' stock price with aggressive share repurchases totaling $394-million last year and $101-million in the first quarter, Mr. Kurson notes. (I made similar points in a Globe and Mail column earlier this year.)

Says Mr. Kurson: "For six years, this tactic has worked, at least as far as the stock is concerned. With negative earnings (and thus no P/E or forward P/E), it's an impressive mirage that Sears continues to trade in the $70 range. Investors love company leaders who obsess over stock price. But customers couldn't care less."

Befitting a men's magazine, Mr. Kurson's columns are testosterone-laced, often written with a tone that suggests those who fail to heed his advice lack intestinal fortitude. A prediction that the chains will cease operating is one of his more aggressive calls.

If anywhere close to true, however, the value of Sears Holdings will then be found not in two money-losing retailers, but in the liquidation value of the stores they operate in. Investors probably shouldn't expect it to be $60 per share, the current level.

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About the Author
Business and investing reporter and columnist

A business journalist since 1994, David Milstead began writing for The Globe and Mail in 2009. During eight years at the Rocky Mountain News in Denver, Colo., he individually or jointly won nine national awards from SABEW, the Society of American Business Editors and Writers. He has also worked at the Wall Street Journal. More

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