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Collection: Mohnish Pabrai - #59 'Sears'



Yeah, that's a good question.

I mean, I think you know, I will just digress for a second before I answer that. But the thing is if you look at Buffett's different investments, and you put them in different categories like, you know, banks or media, insurance companies, retailers and so on. His batting average for example on investing in banks is a thousand.

I'm not aware of any banking investments that Warren has made – he's been investing in banks since 1969. And you know, he used to own a bank [Inaudible] in Illinois, and he [Inaudible] go to Rockford, Illinois once a month looked at the book and so on.

So and he still has a subscription to American Banker which is a daily newspaper. So I don't believe there is a banking analyst on the planet that is better than Buffett on banking. And I think the guy is – so he is never ever been wrong on a bank.

But again, if you take the same Warren Buffett and you look at his batting average on retailers, it is horrible, you know, mistake after mistake after mistake. I mean most of Berkshire's retail operations are useless, I mean he is too diplomatic to say it in the end of report because that will make the CEO of the companies looked bad.

But most of the jewellery operations they bought, most of the furniture operations they bought, you know I think Nebraska Furniture Mart is fine, probably Borsheims is fine. But most of the other ones are useless, they haven't deliver any materials. In fact, most of them probably have not deliver any [Inaudible] that he has paid for that and so on.

So but also again, if you looked at Buffett in media almost a thousand batting average. You know, almost always been right [Inaudible]. So I think – first of all, I think that if you are buying a business which is in secular decline, that has similar attributes to shorting a stock though not as bad.

So I would generally stay away from these businesses, and you know, I used to own Sears and I got my hat handed to me and I learn the difficult way that – So Sears basically, no matter how many IQ points you add to Eddie Lampert.

Eddie Lampert is a third graded retailer, he may be a first graded investor. But being a great investor has nothing to do with running a retail operation or knowing how to run a great retail operation with completely different skillset.

And you know his CEO at Sears that's just a revolving door you know, they just come and go. And they will keep coming and going, now is himself so I guess he won't fire himself. So I think Sears basically...

How many of you shop at Sears?


No one here shop at Sears.


Did they not hear the question? I don't see any hands coming from it. (Laughs) How many of you shop at


No one.


How many of you, you know there's a (Laughs)

What about – how about Sears Your Way? How many of you heard of Sears Your Way? The guy who ask the question on Sears, he must have heard of Sears Your Way because that's all Eddie talks about.




Even he denied having heard of it. (Laughs)

No so there's your answer. You know, the people who shop at Sears are dying everyday. Unfortunately, you know – (Laughter) Service Corps is burying them. (Laughter) And the people being born today, will never ever shop at Sears. So you have secular guaranteed decline.

One thing about business is that you have to understand is there are businesses that are recurring revenue. Recurring revenue is an amazing amazing concept that you cannot give enough weight to when you're making the investments.

I mean going back to our favorite stock, Jammu and Kashmir Bank. That is a recurring revenue business. You know when you get banking clients, people don't switch bank accounts every 3 months or 6 months and they have a loan with you, they are paying you for awhile. I mean those relationships just stay forever.

When you are a retailer, every time a consumer want to buy something. They have a choice as to who they buy from. And you can get stickiness like Amazon, Amazon has a lot of stickiness. Sears at one point had stickiness, but when that stickiness decline reversing that is almost impossible.

In fact, Buffett said that he know no examples of successful retailer turnarounds. Zero. You know, so I think that there is no way out for Mr.Lampert.



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