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By Jason Stipp | 11-18-2010 04:24 PM

Five Reasons to Remember 'It Ain't Over 'Til It's Over'

Morningstar markets editor Jeremy Glaser discusses why the books on GM, Sears, and Ireland aren't quite closed yet.

Jason Stipp: I'm Jason Stipp for Morningstar, and welcome to the Friday Five. Just when we think we're out of the woods or a stock is down for the count, something inevitably happens that proves again, "It ain't over 'til it's over." This week on the Friday Five, Morningstar markets editor, Jeremy Glaser, has five such stories, he's going to share with us.

Thanks for joining me, Jeremy.

Jeremy Glaser: Oh, you're very welcome, Jason.

Stipp: So, what do have for the Friday Five this week?

Glaser: We're going to take a look at General Motors, at Sears, at Ireland, Warren Buffett, and finally, we'll take a look at International Week and wrap that up.

Stipp: Thursday was a big day for the auto industry, General Motors coming back to the public market, yet again. This is a company that actually was down for the count, but it seems to have had a rebirth. What's the take on GM?

Glaser: This is truly been a remarkable turnaround. In about two years, you went from a government-assisted bailout that looks like it had almost no chance of succeeding to an incredibly exciting IPO, where investors were almost falling over themselves to get a piece of it. The price had to be raised and the size of it got raised several times. And even when it launched, stock was up in that first day.

Our analyst, Dave Whiston, who covers the stock has said that, this is a completely new company, that you have to throw out your old preconceived notions of GM. They have cut their costs to the bone; they are going to be profitable even at very low rates of industry auto sales. It looks like they've really turned the corner. Now, they have to deliver on these results. Right now it's just more potential. But I think if they do, we're going to see GM being a strong competitor and being a strong company for the long term.

Stipp: So this is the one where you really have to look through the windshield and not in the rear-view mirror?

Glaser: Exactly.

Stipp: Jeremy, another company that a lot of folks had a lot of high hopes for is Sears. They've had a rough time of it lately. There was some talk about the real estate holdings and some potential that they had. Has that played out so well, or what's the story with Sears?

Glaser: Jason, I should start this off by saying that I am a Sears Holdings shareholder. But I think that lot of people, myself included, thought that there was a lot of potential for the stock. When Eddie Lampert took the reigns and then buy that with Kmart, there was lot of talk that they could unlock value by selling real estate by securitizing some of their big brand names like Kenmore and Craftsman.

Unfortunately this hasn't really played out. Although certainly there is still I think still a lot of value in these brands, still a lot of value in the real estate, the retailing part of it has done pretty poorly, and the third-quarter results which came out this week just underscore that. Same-store sales are doing not very well; inventories are building up in a big way. At the same time the other retailers are really starting to flourish. They are expecting a great holiday season, while Sears is expecting a pretty mediocre holiday season.

I think it shows just how difficult it is to turn around the business like this. You can't just think about those, hedge fund intangible parts, that Eddie Lampert was. You really actually have to get out there and get people to buy the goods that you're trying to sell; make the stores nicer. I think the turnaround is still possible, but it's going to be a long road, especially as everyone else is really getting back on their feet and doing well.

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