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Cramer: Why Sears Keeps on Rising

Jim Cramer

This item was originally published for Action Alerts PLUS on June 1 at 11:30 a.m. ET. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to Action Alerts PLUS, please click here.

Why did Sears(SHLD Quote) spike today? It certainly wasn't anything I saw about the substance of the business; remember, its earnings report Thursday was far from spectacular.

I think it spiked because of the share count. Two numbers tell the story: 153.7 million and 152,492,175 shares. That's the number of shares that were listed in the quarterly release and the number of shares listed in the 10q just released today. That means Eddie Lampert bought back 1.2 million shares between May 5 and May 25.

This is significant because in the last quarter Sears bought back no stock and in the quarter before that it repurchased only 82,363 shares.

The stock ranged from $175 to $182 during the buying period. That means the lowest price Sears could have paid was $175, the highest price $182.52. Again, while we don't know the average price paid for those 1.2 million shares, we do know that it is higher than the $164.91 paid in the fourth quarter. That's very important.

Sears has a ton of cash, more than $3 billion. At this pace, if Eddie miraculously paid the low for all of that stock, he would go through the part of the $600 million buyback authorization that remained as of the press release in about 60 days. When that's gone, I believe he will authorize another one.

The story here has always been one of running the business for a profit and deploying cash through buybacks. This company is worth $23 billion after cash. That's ludicrous. The sales per share here amount to $340. J.C. Penney(JCP Quote), a company only slightly smaller, has sales per share of just $86. Federated(FD Quote), now Macy's -- also similarly sized -- comes in at $49. Home Depot(HD Quote), almost three times bigger, is $44. Lowe's(LOW Quote) is about twice as big yet has just $30 in sales per share.

On any metric -- sales, real estate, brand equity, whatever -- this store chain is cheap and Eddie Lampert still hasn't rationalized the darned business! He hasn't closed the overlapping stores, he hasn't sold real estate, he hasn't closed non-performers. That's bad; I don't like it. He hasn't even solved Sears Canada yet.

But that's in the future. And that's what matters.

I'm still not happy about the last quarter. But I'm going to stand pat with this, my third-largest position in the portfolio. With action like this, I'm happy to wait for this story to play out.