Sears continues stellar stock performance

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Posted: Jan 23, 2012 12:39 PM
Sears continues stellar stock performance

Sears continues its ascent as the improbable top performer for the year on the Standard & Poor's 500 index, defying a string of bad news, macabre earnings reports and rumors that lenders would cut off financing for suppliers.

Shares of Sears Holdings Corp. have jumped an astounding 61 percent this year, another 6 percent Monday, lighting up financial blogs with investors unable to figure out what has gotten into the stock, driving it ever closer to a 52-week high.

Credit Suisse on Monday said it had the answer: Short sellers who can't get out of the way fast enough.

The report comes on the heels of a rumor that Chairman Eddie Lampert would buy the company and take it private.

And the stock keeps rising, up $3.20 to $45.20 Monday, perhaps even turning on its head news that had previously jolted the value of the iconic retailer. There were reports Thursday that CIT Group Inc. may begin approve financing for Sears' suppliers _ just days after several published reports claimed that CIT had begun cutting them off.

That was two days after shares surged on filing reports showing that Lampert had snapped up $159 million in stock, which suggested to some that he was taking the company private. He owns about 59 percent of the company's shares.

Credit Suisse analyst Gary Balter is calling it a short squeeze. In other words, investors who may have shorted the stock, hoping to make a killing when shares fell even further, are now being forced to buy more stock in order to protect themselves from what, at the moment, seems to be a mistaken bet against Sears.

As for the future of the company, Credit Suisse did not mesh words.

"There are four days you do not want to own this stock and those are the four quarterly earnings days," Balter wrote. "Other than those, this stock seems to live off of stories, with the latest being that a leveraged buyout is ahead."

That, Balter said, is unlikely, "given the poor positioning of both Sears and Kmart."

In November, Sears posted a worse-than expected third-quarter report, citing poor electronics sales and lackluster clothing sales at Kmart. Last month, after a disastrous holiday shopping season, Sears said it would close at least 100 stores to raise cash _ raising the specter that the end may be approaching for the 125-year-old retailer.

Balter is sticking by his "Underperform" rating. He has a $20 price target for the stock.

That's below the 52-week low of $28.89.