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Is Eddie Lampert of Sears really the worst CEO of the year?

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I know it's the end of the year. We're all bombarded with the "Top X of 2007" or the "Worst Y this Year." I'm actually thinking of making the top lists of the top lists. It's like Kramer's coffee table book about coffee table books on Seinfeld.

Anyway, Herb Greenberg of Marketwatch threw his hat into the ring this morning with his vote cast on the worst CEO of 2007. The winner (or is it loser?): Eddie Lampert, CEO of Sears Holdings (NASDAQ: SHLD). Herb says of Lampert, "So far, for all of Sears, including Kmart, the strategy [of focusing on profitability over revenue growth] has failed miserably. Not only have same-store sales (which Lampert says are "overrated" as a metric) gone deeper into the red, but gross margins, Ebitda and operating income for Kmart are also going in the wrong direction."

I'd like just to posit the idea that while Lampert might have failed as a CEO of Sears, the retail store, turning around the old-school retailer hasn't really been his main priority. He's trying to follow in Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) shoes by using a cash flow business as the crux of an investment empire. So investors should begin to judge Lampert's firm as a holding company, not just on Sears' results.

And with this perspective, I think that the jury is still out. Even though the stock is down over 30% this year, investors in SHLD have enjoyed a 650% return over the past five years.

Does that mean that Lampert lets the stores lay fallow? Probably. Is this good for America or the Sears brand? Probably not. But the platform that Sears provides for Lampert is huge, particularly when he begins to further pare down the retail base.

Zack Miller is the Managing Editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Author holds no positions in the stocks mentioned above, but clients hold BRK.A.

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Last updated: November 10, 2009: 06:38 AM

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