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The Real Value in Owning Wall Street’s Most Dangerous Stock

My editor couldn't believe it…

"But Keith, you consider it one of the most dangerous stocks on Wall Street!"

"Not one of," I replied, "it's the most dangerous stock on Wall Street."

And I believe every investor needs to own it at least once in their investing lifetime…

For this surprising reason.

The True Value of a Meltdown

I know, I know.

I can hear the wheels of doubt spinning right through the Internet!

"Ah, I need to own Sears Holding Corp. (Nasdaq: SHLD) like I need another hole in my head!"

The retailer has lost a staggering $152 per share and 93% of its value since peaking in 2006 at $158 a share. It's dropped 83% in just the last two years alone.

Calling the company "a bug in search of a windshield" is an understatement.

All true.

Yet, Sears can teach every investor a surprising lesson when it comes to bigger profits.

Let me explain.

Sears is a retailer trapped by three things:

  • its own legacy;
  • chronic underperformance in the face of Amazon.com Inc. (Nasdaq: AMZN);
  • and executives who are systematically stripping it of anything remotely resembling value.

The store has tried and failed to be everything to everybody without realizing shoppers marginalized it years ago. E-commerce is killing it and my back of the envelope calculations tell me the company needs between $1.5 and $2.0 billion dollars in funding just to service the staggering debt load it carries this year alone.

Put succinctly, it's a company that's long on hope and not much else.

That's why I singled out the once-proud retailer in January 2015 as one of the five most dangerous stocks on Wall Street, and have again several times since. Anybody following along has had the opportunity to bank at least 83%, or avoid losses of the same magnitude.

Some have ridden it all the way down from $32 a share to $7.10 where it's trading today, all the while suffering a catastrophic loss. "It'll be back," goes the rally cry.

Others are diving in because it's "a turnaround play" or "ripe for a rebound." Good luck. People said the same thing about Eastern Airlines, People Express, Kodak, and Palm. They're all gone.

So why on earth would I say every investor needs Sears?

Because the true "value" of owning it (or any stock like it) is what you learn from the experience.

Here's what I mean…

Successful Investing Is About Being Profitable, Not Right

The critical lesson is that there comes a point at which you've got to stop viewing Sears – or any stock like it – for what it's been and view your money for what it could be.

There are a lot of ways to do this, but the ultimate litmus test is very simple: ask yourself if you want to own a stinker to prove that you're "right" about its potential, or because you want to be profitable for having taken the plunge.

That sounds obvious, but you'd be surprised how many investors can't sort out the difference.

I know this because there was a time when I couldn't, either.

In the 1980s I owned stock in a small educational software provider named Worlds of Wonder that I was convinced would change the world.

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About the Author

Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.

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  1. Paul D. | February 13, 2017

    I was under the impression that the value of Sears was in their real estate holdings. The liquidation of the RE would support and give value to the stock.

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