[This is a backlog for a previous trading transaction. It may not fully represent my thinking at the time of the trading.]
I purchased 100 shares of S at $25.85 today with a commission of $10.99.
Frankly speaking, I know Sears has lots of headaches: its retail business is not growing (Same-Store-Sales in the decling for more than a dozen months), majority of the profit comes from the credit business, and the credit business is in question after its Q3 earning release disaster (failing to reserve enough for bad debt).
However, the valuation of the issue is more than impressive. Even in worst scenario, I believe Sears can sustain an annual EPS of $4.50 or more. The credit portfolio reserve issue should be merely a one-time issue and the new management of the credit business should not make the mistake again. Management is reinvent the retail business (one of the important steps is to acquire Land's End). At the price of around 5.7 times EPS I'm very comfortable that all the risks have been adequately compensated, and the 3.6% dividend yield is a nice plus too.