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Back in May, I told you about two pathetic retail dinosaurs – Sears Holdings Corp. (Nasdaq: SHLD) and Kohl's Corp. (NYSE: KSS) – and how to play both stocks for big gains as they lurch toward their deathbeds.
Today, I want to give you an update on how those stocks are faring – and how your positions are looking if you took my advice.
And I hope you did… because we're already up double digits.
The Retail Frankenstein That Just Won't Die
On May 3, I gave you all the sordid details of Eddie Lampert's failed financial engineering experiment that frankensteined Kmart and Sears together into a retail abomination. Here are the facts I reported at the time:
- Sears Holdings has lost $10.4 billion since 2011. Excluding "one-time charges" and "events," the loss is $4.57 billion.
- Sales are down 44% since 2012.
- The company just registered its 21st consecutive quarter of losses.
- Same-store sales in the last quarter of 2016, which includes the holiday shopping season, were down 10.3%.
- In the summer of 2015, SHLD had $1.8 billion in cash. By the end of 2016, it was down to $258 million.
But Lampert is running out of time, money, and most importantly, valuable assets. After a little boost to the stock price on the heels of the sale of the Craftsman brand, the scaffolding fell away and the stock price plummeted.
I recommended that you short Sears at around $10.25 and that you plan on shorting more at $11.00, and a lot more at $13 and $14.
If you followed my advice, you're short Sears at around $10.63 after averaging in when the stock briefly rose to $11.00 on May 10.
Since then, it's been almost all downhill for SHLD. On June 6, it hit a low of $6.44, giving you 39.35% gains in just over a month.
Not bad.
But let's say you bought some put options instead. I recommended that you target out-of-the-money puts that expire in late 2017 or even 2018 to give yourself some time to weather any more of Lampert's financial engineering schemes.
I'll give you a few examples…
If you bought options expiring in December 2017, here's what you're looking at right now:
| SHLD Puts | Price as of 5/4/2017 | Price as of 6/7/2017 | Returns |
| December 2017 $9 puts | 3.40 | 4.20 | 23% |
| December 2017 $8 puts | 2.70 | 3.60 | 33% |
| December 2017 $7 puts | 2.17 | 2.85 | 31% |
| December 2017 $6 puts | 1.61 | 2.20 | 36% |
| December 2017 $5 puts | 1.15 | 1.60 | 39% |
If you went for the January 2018 puts:
| SHLD Puts | Price as of 5/4/2017 | Price as of 6/7/2017 | Returns |
| January 2017 $9 puts | 3.50 | 4.69 | 23% |
| January 2017 $8 puts | 2.77 | 3.71 | 33% |
| January 2017 $7 puts | 2.17 | 3.06 | 31% |
| January 2017 $6 puts | 1.62 | 2.32 | 43% |
| January 2017 $5 puts | 1.22 | 1.74 | 42% |
And it's only getting worse for Sears – it just announced more store closures.
If you're short SHLD, great job. If not, you still have time to ride the stock to the bottom…
The Writing's on the Wall, but This Retailer Can't Read
Two days later, on May 5, I told you the story of Kohl's – seemingly the only dinosaur retailer who hadn't got the memo about the impending extinction of brick-and-mortar retail.
Here's what I said…
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About the Author
Shah Gilani is the Event Trading Specialist for Money Map Press. In Zenith Trading Circle Shah reveals the worst companies in the markets - right from his coveted Bankruptcy Almanac - and how readers can trade them over and over again for huge gains.Shah is also the proud founding editor of The Money Zone, where after eight years of development and 11 years of backtesting he has found the edge over stocks, giving his members the opportunity to rake in potential double, triple, or even quadruple-digit profits weekly with just a few quick steps. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.