Sears Hints at a Hunt

With sales still in decline for the No. 3 U.S. discount-chain operator, the all-star hedge fund manager who runs the company reminded Wall Street that an investment in Sears Holdings (SHLD Quote) is more than just an investment in a retail conglomerate.

Sears reported a jump in second-quarter earnings thanks to widening profit margins as the company continues to slash expenses. But a slide in total sales and comps provides more evidence that the company is bleeding market share to rivals such as Wal-Mart (WMT Quote) and Target (TGT Quote).

Shares of Sears recently were down $5.90, or 3.9%, to $144.10 as a result, but the company's press release contained hints that its chairman, Ed Lampert of the hedge fund ESL Investments, may be preparing to use the retailer's cash pile to make investments elsewhere.

"Our strong financial position and cash flow generation provide us with the flexibility to capitalize on a wide range of market opportunities as they arise," said Lampert in the release. "In addition to investing in our business and acquiring our shares, we are prepared to invest substantial amounts of capital if we identify other attractive investment opportunities which have the potential for returns we believe appropriately compensate the company for the associated risks."

Sears' board has granted Lampert the authority to invest the retailer's surplus cash in "marketable securities and other financial instruments, including derivatives." While the company said its cash currently resides mostly in short-term liquid investments, it said it may make "significant and highly concentrated direct investments" in other public companies.