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Sears plunges more than 20%

November 16, 2012: 3:15 PM ET

Sears has been a hot stock this year. But are investors losing patience with the turnaround story after yet another quarter of losses and slumping sales?

Sears (SHLD) is amazingly still one of the hottest stocks of 2012. Shares are up nearly 55% year-to-date. But the retailer's stock plunged more than 20% Friday after the Kmart owner reported another massive loss and a decline in sales.

The company has been in turnaround mode for years. But it has two things in its favor that has kept the company from becoming as much of a mess as fellow retailer JC Penney (JCP): big investments in valuable real estate and hedge fund manager Eddie Lampert.

Some short sellers have been wary of ganging up on Sears too much -- despite poor fundamentals -- because Lampert has often squeezed them by increasing his stake in the company through his various holding companies.

That's why some investors on StockTwits still think Sears might be a decent bet.

vcutrader: I would own $SHLD over $JCP anyday

Convertbond: Thank god for that real estate. That makes 23 straight quarters of negative sales growth at Sears Holdings $SHLD

At least one trader was surprised by the big sell-off in Sears Friday because the company's results, as bad as they were, still topped analysts' forecasts.

MomentumPartnersLLC: $SHLD weird it was a good repoort but selling off into it anyway dont know what folks expected

A fair point. And I realize that stocks often move more on relative expectations than absolute performance ... at least in the short-term. But I do think that investors can't ignore the continued declines in same-store sales, overall revenue and mounting losses. And considering that Sears is up as much as it is this year, the company has to eventually prove to Wall Street that the turnaround is for real.

That's why some other traders are still skeptical. Fundamentals do matter. And they're not very good.

douglas_blake: I think $JCP and $SHLD need to understand that consumers don't want Arizona Jeans and Bugle Boy Sweaters anymore.

PearlsToPigs: $SHLD - I told you to short this dog - Sears - no one shops there anymore - remember you must be a Contrarian to make the $$$ -

It's a bit of perverse logic that the Sears contrarian play is to bet against a company that has been doing poorly for years. But that's Wall Street for you.

And now for my Reader Comments (yes plural!) of the week. Who's hungry? Douglas Blake, who already was mentioned in this piece for his Sears/JCP comment, wins one of the awards for an amusing culinary stock mash-up. He noted how shares of Apple (AAPL) and nut maker Diamond Foods (DMND) were both down on Thursday. Hence this gem.

Ha! Now that we've eaten healthy with some fruits and veggies, let's have some dessert.

I decided to give out another Reader Comment of the Week so this story wasn't all about Doug Blake. The big business news story of Friday is the closing of Twinkies manufacturer Hostess Brands. I speculated on Twitter this morning about whether Mexico's Grupo Bimbo, one of the largest bakery companies in the world, might want to buy some of the Hostess assets. This response was very funny.

Brilliant! It's good to be the king ... of bread and crumb cake donuts!

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