The chain that once dubbed itself "where America shops" is increasingly a place shoppers avoid. Despite its much-publicized recovery efforts, investors should consider steering clear, too. Sears Holdings Corporation (NYSE: SHLD) has been in the news a great deal lately, announcing awful sales results and planning yet another stock buyback to prop up its flailing price.

The recent store changes have not worked, and neither will the financial engineering. This company is on its way down, and a visit to a local store showed me why.

Sears used to be the General Motors (NYSE: GM) of retailers -- an apt analogy when both were all-American giants, and just as apt today as both struggle. Sears had completely lost its way when vulture investor, Eddie Lampert, bought the company in late 2004 and combined it with Kmart. Wall Street analysts went nuts, pushing the stock price to $192 a share.

Today, Wall Street has lowered that price to near $40.

Sears (NASDAQ: SHLD) is scheduled to report earnings for the third quarter on Tuesday, December 2. The expectation is for a loss of $0.49 per share. I think it's therefore safe to say that the retailer won't be turning a profit.

Sears has been one awful retail story as of late. Actually, just about every retailer has been awful as of late. It's no surprise, of course, considering the economy. But Sears has been experiencing challenges even beyond what can be explained by the economy. The company has been missing estimates, same-store sales haven't been great, and if you take the time to talk to people about Sears, or if you follow the comments of pundits, you'll sometimes note a tone of repulsion when it comes to the big chain.

I haven't been a fan of the shopping experience at Sears either, and it's been a very, very long time since I've stepped into a Kmart. In fact, there isn't a Kmart close to me. Eddie Lampert's enormous task of helping to turn this ship around is not one I envy. Of course, many retailers make the mistake of only focusing on merchandising in the stores and figuring out what should be in the weekly circulars. Don't get me wrong, that's important stuff. But Sears needs to engage a branding campaign to make people feel good about its stores, to feel confident about the shopping environment. When you look at TV ads by Wal-Mart (NYSE: WMT) and Target (NYSE: TGT), you can't help but marvel at the branding acumen of those retailers. Sears needs to get creative, too.

As we begin the trek to grandmother's house, it's worth reflecting on what we have to be thankful for. The answer? When it comes to money, most of us have a lot less than we did a year ago. But for those of you who have your health and your families to comfort you, it will cost much less to buy the gasoline to visit than it would have in July. And as you're driving to visit those families -- consider how much less you lost in the last year than the world's 10 biggest losers.

According to the web site, The Business Sheet, those unfortunate people suffered a mind-boggling $176 billion in lost stock market value in the last 12 months. It turns out that 52% of the losses were suffered by three executives based in India. Here they are:

• Anil Ambani - $32.5 billion. Ambani heads Reliance Communications that invested $500 million in Dreamworks earlier this year.
• Lakshmi Mittal - $30.5 billion. Mittal heads ArcelorMittal which has suffered from a decline in the price of steel.
• Mukesh Ambani -$28.2 billion is Anil's brother and controls Reliance Industries, a petrochemical manufacturer.

These are some other folks that make The Business Sheet's list:

• Sheldon Adelson -$30 billion. I did consulting work for Adelson about 22 years ago and he is quite a character. His Las Vegas Sands (NYSE: LVS) casino is suffering from the economic slowdown and he's had some trouble with debt.
• Warren Buffett -$13.6 billion. As I posted, Buffett's Berkshire Hathaway (NYSE: BRK.A) has had some problems this year.

Just as soon as Sears Holdings (NYSE: SHLD) re-arranged deck chairs on the Titanic, the retailer, headed by hedge-fund guru Eddie Lampert, reported another absolutely dismal quarter Thursday morning. In 2008, shares in Sears Holdings have sunk 36% as the retailer continued to report quarter after quarter of sluggish sales, declining revenue and underinvestment in its retail locations.

Lampert's idea of cutting investment in stores to boost actual investment returns has failed, and failed miserably. One thing customers respond to is constant change in their shopping environment, and this is where Sears has failed. Its stores look the exact same as they did four years ago. Even the logo has not changed.

Retailers like Target Corp. (NYSE: TGT) and Wal-Mart Stores, Inc. (NYSE: WMT) apparently know way better how to get seasonal and high-request goods to their stores. They do it in a fashion that turns inventory and makes sales far better than Sears' manages with its current grip on retail. In fact, I am not sure Sears even has a current grip of retail. It's a goldfish (albeit a large one) nearing the top of the fishbowl. With Lampert's track record, one would think he would have made changes a year ago. He has not, and Sears continues to flounder badly. The Wall Street Journal thinks Lampert should go, and go now. What do you think?

Even Lampert's acumen in taking out pieces of an investment and selling for a profit hasn't worked out. What about selling off a good portion of its real estate holdings under the combined Sears/KMart umbrella to help make a profit? Even that time has passed though. Lampert's original prediction for Sears Holdings has failed, and unfortunately he won't be adding this experiment to his resume that includes the years-ago notion that he was the next Warren Buffett.

KB Home (NYSE: KBH) shares are trading higher after a report that hedge fund manager Edward Lampert has bought "small stakes" in homebuilders Centex (NYSE: CTX) and KBH, thinking that the housing market may be poised for a recovery. Investors are taking this news as a good sign for KBH. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on KBH.

After hitting a one-year high of $44.51 last June, the stock hit a one-year low of $15.76 in January. KBH opened this morning at $18.21. So far today the stock has hit a low of $18.15 and a high of $19.07. As of 12:00, KBH is trading at $18.87, up 1.00 (5.6%). The chart for KBH looks bearish and steady, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.

For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $15 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in just five weeks as long as KBH is above $15 at July expiration. KBH would have to fall by more than 20% before we would start to lose money. Learn more about this type of trade here.

KBH hasn't been below $15 at all in the past year and has shown support around $17.50 recently. This trade could be risky if the financial sector continues to tumble or if the Fed makes its first interest rate hike in a while, but even if that happens, this position could be protected by the support the stock might find around $16 where it put in a bottom in January.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in KBH.

Sears Holdings (NASDAQ: SHLD) really blew its earnings numbers. According to Briefing.com, Sears' Q1 adjusted earnings missed by 68 cents. Nope, no beating by the proverbial penny here, folks. Sears was expected to report an adjusted profit closer to 15 cents per share; instead, not the 53 cent loss booked by the retailer. Man, that's bad. Wall Street also expected a better top-line performance. But Sears couldn't come through on that count, either. Net sales for the quarter declined almost 6% to a little more than $11 billion.

But wait, there's more bad news. Same-store sales at Sears took a turn for the worse, diving almost 10%! Comps at Kmart decreased 7%! The gross margin went down! Want more, or is that enough? The Sears story is not a good one. What's going on here? Well, the release does say something about a bad economy, but that isn't a worthwhile excuse. Sears simply needs to apply itself and get traffic into its stores. Use some thinking-outside-of-the-box marketing campaigns to reignite the brand's fire.

Today's stock market rally may be more of a relief run than anything, but the end of day strength of late has been hard to ignore. Today we saw a huge drop of almost 9 million barrels of oil that caught traders off guard, but interestingly enough the oil markets dropped considerably. Combine that with a slightly higher revision to Q1 US GDP to +0.9% and all of a sudden the recession isn't looking so serious. These are the major US index closing levels:

• DJIA 12,642.47 (+48.20)
• S&P500 1,398.03 (+7.19)
• NASDAQ 2,508.32 (+21.62)
• 52-WEEK LOWS
• Top 10 Analyst Calls (ALU, CHS, LONG, IFX, JNPR, MAR, MFA, NSC, SNDA, VVUS)

Big Lots Inc. (NYSE: BIG) beat earnings and raised certain parts of guidance, and shares were up over 9% at $31.21 in the final minutes of trading.

When Edd Lampert merged K-Mart and Sears Roebuck into Sears Holdings Corp. (NASDAQ: SHLD), he probably didn't plan for a complete and unmitigated disaster. But, from all accounts, that is what the company is at this time. Its sales have consistently plummeted for more than just a few quarters now, the competition has killed it. Sears merchandising frankly is really, really bad -- and on and on.

Lampert's grand vision is still alive, but the realities of running a national retailer in an intense environment have not proved easy at all. What's keeping Sears Holding's shares above $100, you say? Check out the company's vast real estate holdings. Don't think for a second that this isn't the reason Sears is majority owned by Lampert, who could care less about the retail end of the business.

Still, you have to run a business. It's always nice to see that a former CEO who appeared to do virtually nothing in terms of performance get an annual base salary of $1 million through the next few years -- even though he's no longer at the company. Ousted CEO Alwyn Lewis, who was highly regarded when recruited for the Sears Holdings CEO spot but who was wholly ineffective, will receive his salary package through March 24 of 2010. Lewis will also continue to have health and welfare plan availability along with having his remaining stock and option awards vest until 2010 as well.

Even though the boards of public companies should be completely separate from the management and owners of the company, it's hard to see that they're not when excessive, after-term packages like this come to light. Pay for performance? Hogwash. CEO compensation committees can be as corrupt on company boards as those Enron folks from years back. Well, to a degree, anyway.

Eddie Lambert may have to loan Sears Holdings (NYSE: SHLD) some money. Cash at the company be getting very tight. According to the Wall Street Journal, "some analysts wonder whether falling sales, slimmer profit margins and other woes are causing cash flows to decline to a level that could hinder a turnaround."

The last cash balance that Sears announced was lower than most analysts expected. If the company needs to spend money to improve its stores or increase inventory in products it thinks will sell well, it could draw down the cash level even further.

For Lampert, the bad news keeps getting worse. Sears stock has staged a mini-rally over the last two weeks, moving from below $85 to $103. News about cash problems could push the shares back down.

Lampert made the classic error of thinking that with Sears and K-Mart 1+1=3. In reality, he took two weak companies and saved some money in a merger. The problem was that the companies got even weaker.

Who says that hedge fund managers don't make good corporate chiefs?

Douglas A. McIntyre is an editor at 247wallst.com.

Aylwin B. Lewis will step down as CEO of Sears Holdings (NASDAQ: SHLD), paying for the sins of his boss, hedge-fund billionaire Eddie Lampert. Lampert put together the Sears chain with K-Mart and found that one plus one equals zero when the brands are so poor that people would rather shop at Wal-Mart (NYSE: WMT).

Shares in Sears are down from a 52-week high of $195 to under $100. They will probably fall much further. Lampert has said he will make operating units more free to handle decisions at the brand level. He brought in new management to run the company's e-commerce unit.

In a statement quoted at MarketWatch, Lampert said ,"We are entering a new phase in Sears' evolution as a multi-channel retailer, as reflected by the new operational structure we recently announced, and the board has determined that now is the right time to put in place new leadership to take the company forward."

In other words, "we have no idea what we are doing, so we will try a new horse."

Douglas A. McIntyre is an editor at 247wallst.com.

Is it better to invest in a company whose CEO is a star or a company that breeds generations of outstanding CEOs? If you think a star CEO is better, I have two stocks to consider -- but also one to avoid. And if you think a CEO breeding ground is better, one stock comes to mind.

Today, I appeared on CNBC's Squawk Box this morning with Yale's Jeff Sonnenfeld to give my picks for the three best and worst CEOs of 2007. Here are the three best CEOs along with the name of the company, the stock price performance over the last year, and my reasons:

• Steve Jobs of Apple Inc. (NASDAQ: AAPL) +144%. Successful iPhone introduction with a million units sold in its first 74 days (some estimate Apple will announce it's sold five million in mid-January) plus outstanding performance of Apple retail stores -- they account for 20% of Apple revenue and those revenues have grown 42% in the last year while the stores earn $4,000 per square foot -- much more than competitors. At a Price/Earnings to Growth (PEG) of 1.8 it remains to be seen whether Apple can grow enough to justify its P/E of 50.
• Warren Buffett of Berkshire Hathaway Inc. (NYSE: BRK.A) +28%. Berkshire's stock had a great year -- it has not done as well since 1998 when it rose 52%. Berkshire's return on equity is up from 11% in 2006 to almost 16% as of September. Berkshire is a safe haven stock and Buffett continues to find places to invest his $47 billion in cash. One caution -- Barron's thinks that Berkshire stock is 10% overvalued.
• Lloyd Blankfein of Goldman Sachs Group (NYSE: GS) +6%. Only firm to make money while peers lost billions -- its short position of the ABX index--which represents a basket of credit default swaps on mortgage-backed securities- yielded $4 billion in profit -- offsetting a $2 billion loss in its $10 billion CDO portfolios. I was impressed by the way Blankfein carried Goldman's culture of encouraging intellectual debate between lower-level traders and top executives to arrive at the best decisions. Goldman trades at a P/E of 8.6 and its earnings are expected to grow 4% next year. But that forecast is a real toss up so if you buy the stock, take a long term view.

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.

Recently 24/7 Wall St. ran a list of CEOs who may need to go back to business school. The performance of their companies has been so poor that they need a period of re-education, some tutoring in the basics.

The 24/7 list included the heads of AMD (NYSE: AMD), Boston Scientific (NYSE: BSX), McClatchy (NYSE: MNI), Level 3 (NASDAQ: LVLT), Yahoo! (NASDAQ: YHOO), Countrywide Financial (NYSE: CFC), and Morgan Stanley (NYSE: MS). None of them have done shareholders any favors even if stock price is the only measurement.

But, it is time to add a few more names to the list.

Starbucks (NASDAQ: SBUX): These shares are now off to $22.49, near a 52-week low. The shares have a period high of $37.14. James Donald has the CEO job at Starbucks, but the founder Howard Schultz is still around. Wall Street could certainly argue that the company has made a lot of mistakes starting with overbuilding stores in the US. Another is that the new menus in the stores seem to be have been decided by random. If the company cannot improve same-store sales soon, the stock will go lower. This seems basic, but SBUX has not given shareholders any plan for addressing it.

Blockbuster (NYSE: BBI): It is hard to have blown the lead that Blockbuster had in movie distribution. But it did. CEO James Keyes does not seem to have any logical vision about how to solve the company's problem, which is that digital distribution has passed it by. He argues that customers will go to kiosks at Blockbuster stores to download movies. Instead of doing it at home on the internet? Or getting the DVD in the mail? Not much of a plan.

Sears Holdings (NASDAQ: SHLD): The name on the CEO's door at Sears is Aylwin Lewis. But Eddie Lampert is the chief. The marriage of K-Mart and Sears has been a disaster. Same-store sales at both companies run below the industry average. It would be very hard to argue that the merchandising programs at the retail outlets is compelling enough to bring in new customers. Lampert exhibited poor judgment in sending out a letter that was picked up by the press. His defense of the company was that it had reduced debt and bought back shares. That will help a lot when his stores are empty.

Douglas A. McIntyre is an editor at 247wallst.com.

When Sears Holdings (NYSE: SHLD) reports Q3 earnings tomorrow, we'll see again if chairman and out-of-his-retail-league financier Eddie Lampert will wow investors.

Regardless of how its retail operations have performed, how is Sears doing when it comes to returning equity to shareholders? Now that William Ackman has taken a 3.5% stake in the holding company (oops, retailer), will that investment start paying off tomorrow? Lampert still controls 46% of the retailer, so with activist investor Ackman's new slice, it's unclear if he'll soon be forcing any changes at the company. But, in previous stints, Ackman has forced real estate sales and similar actions at large food service companies and other retailers to get his return. Things are different in Lampert-land, though.

The company has so far underperformed from the retail side of the business, and it's probably forced Lampert to wake up and and realize he has to ensure those operations continue to perform. Analysts polled by Thomson Financial expect a profit of $0.50 on revenue of $11.61 billion tomorrow.

Will we see that? Perhaps. It is still not clear how long it will take Lampert to unlock the value of his grand masterpiece, but so far it's either not working and impatience from the market is bubbling up.

Specialty retailer Restoration Hardware (NASDAQ: RSTO) was supposed to be sold to private equity firm Catterton Partners for $6.70 a share. But, so much for the "done deal," the "sure thing." Late yesterday, Sears Holdings (NASDAQ: SHLD) bought 13.9% of the smaller company's shares.

According to CNN Money, "Sears said it may make a tender offer for all of Restoration Hardware's shares or raise its stake by buying additional shares on the open market." RSTO shares rose to $7.46 after hours.

But with Sears in such deep trouble of its own, why is it fooling around with buying a small retailer with a $250 million market cap, $800 million in sales, and shaky profitability?

Why, indeed? Shareholders in Sears would have a right to be upset. Head man Eddie Lampert would have people believe that his retail giant, which combines Sears and K-Mart, is the picture of efficiency and smart merchandising. Why then, are its shares at a 52-week low of just above $114 a share?

Sears can't waste its time buying little companies. It has too many big problems of its own.

Douglas A. McIntyre is an editor at 247wallst.com.