Sears Holdings Corporation (SHLD): Don’t Gamble On This Turnaround Candidate

Instead, if an investor wants to get retail exposure, there are many better ways to play the sector.  Kohl’s Corporation (NYSE:KSS), for example, is a consistently profitable company that trades for 11.2 times current fiscal year earnings, and are projected to have a forward earnings growth rate of over 10%.  Also, investors are paid a nice 2.76% dividend yield while they wait for growth.

Another good play on the sector is Nordstrom, Inc. (NYSE:JWN), which trades at a higher valuation of 15.9 times earnings, however is projected to grow its earnings by 13.1% and 13.9% over the next two years. Nordstrom has done the best of these department stores in terms of setting up a formidable online presence.  They actually have a shared inventory platform set up, where nordstrom.com orders can be fulfilled from any of the company’s 221 stores.  This unique setup has led to perhaps the best inventory turnover rate in the sector, which should help margins going forward.

Either of these two names are a great way to get some specialty retail exposure in your portfolio, without taking on unnecessary risks associated with a yet-to-turn-around company such as Sears Holdings.  As far as Sears goes, I think it may actually be too expensive at current levels and I would wait for a considerable dip in the share price before taking a chance on this one.

The article Don’t Gamble On This Turnaround Candidate originally appeared on Fool.com and is written by Matthew Frankel.

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