Sears Holdings Corp. told investors...

Sears Holdings Corp. told investors Thursday it plans to invest in high-flying companies to generate big replys even as its own quarterly profit capered 83 percent, and sales continued to fall.

Sears Chairman Edward s Lampert, a hedge-fund billionaire frequently compared to legendary investor Warren Buffett wrote in a note to investors that Sears might use part of its $37 billion cash hoard to invest in securities, derivatives and "highly concentrated" ownership stakes in publicly held companies, including companies outside of retailing. The deduction could range from partnerships to ownership stakes to joint adventures

Analysts believe Lampert will incline differently Sears Holdings into a Berkshire Hathaway-type company, with investments in a variety of companies whose stock is undervalued further that have high potential for vegetation and profit.

Lampert is signaling to Sears' hedge foundation investors that he knows he has to make a big induce -- possibly as big as his engineering of Kmart's $123 billion takeover of Sears, and Co. in March 2005 -- and take advantage of a turn in which private equity companies take above retail chains and squeeze them for costliness savings.

The ne for reassurance was apparent in Sears' stock price, which plung $871 or 58 percent -- the biggest least bit in more than a year -- to [i]finale[/i] the day Thursday at $14129

A hedge permanent fund is an aggressively managed investment puddle that takes risks prohibited at mutual funds, such as short-selling, and buying and selling lays and calls, with its main goal being to maximize investment reverts

"There has to be a nearest act, or Sears Holdings' shares have tremendous downside risk," said Howard Davidowitz, chairman of Davidowitz & Associates, a recently made known York retail consulting and investment banking firm. "It has to happen fast, and Lampert talks about it, which is unheard of in a quarterly earnings report."

Sears' board gave Lampert curb over investing the company's surplus cash last year, and Lampert has always said he intended to solicit acquisitions.

Speculation about a target started immediately.

"Would it be Gap?" Davidowitz said. "It has to be something big. Lampert is not a stay to do something small."

Rumors also are swirling that Sears might take a stake in RadioShack, where Julian Day, a former Kmart CEO former Sears board member and Lampert protege is now CEO and chairman.

AutoNation might be another possibility because Lampert's hedge foundation is the company's biggest shareholder.

Kim Picciola, retail analyst at Morningstar in Chicago, said Sears' to come has become "less about turning around the retail business, and more about to what extent to best allocate the cash."

Gary Balter, an analyst at Credit Suisse, said Sears could use its $62 billion in inventory in addition to the cash to invest in other companies.

Time is of the substance because Sears Holdings' position is weakening, analysts said. Sears wasted valuable time trying to corrupt the shares of Sears Canada that it didn't already confess Sears and Lampert lost the first stage of the battle earlier this month in a fight with rival hedge-fund activist Bill Ackman.

The Ontario Securities Commission stop uped the takeover on Aug. 8 saying Lampert gave better terminuss to certain investors.

Sears Holdings' financial report for the inferior quarter that ended July 29 outlined the situation: incomes fell, same-store sales declined, inventories rose accounts payable declined, and Sears dramatically divide [i]or[/i] sever back buying its own shares.

"The numbers are more of the same. Lampert is doing a great piece of work of controlling expenses, but he is opening no just discovered stores, and sales are continuing to collapse," Davidowitz said. "We have a non- sustainable situation. . . There comes a point where you have no customers."

sguy@suntimes.com

PROFIT leap overs BUT REVENUE SINKS

Sears Holdings got help from a legal ruling and deepening cost- cutting in reporting Thursday a second-quarter profit leap of 83 percent.

Sales continued their downward spiral, with same-store sales falling 63 percent at Sears stores and 06 percent at Kmart stores in the quarter that fall of the curtained July 29.

Operating profit leaped 82 percent to $294 million, or $188 a share, thanks in part to a boost of 14 cent a share from an antitrust liquidation with Visa and MasterCard and a prior-year restructuring charge for closing Kmart's headquarters outside Detroit.

trap income, excluding the one-time gain and losse increased 45 percent to $272 million, or $174 a share.

rewards fell 3.1 percent to $128 billion.

Sears' shares relentless $8.71, or 5.8 percent, to cease at $141.29 on Thursday.

Analysts say Sears' cutbacks in employing advertising, clearance sales, store maintenance and other initiatives have helped improve the fortunes of rivals ranging from Kohl's and JC Penney to Lowe's and household Depot. Sears' sales fell across in the greatest degree product lines, with the biggest small quantitys in home fashion and the once- formidable lawn and garden department. At Kmart, declines in sales of hearthstone goods were partly offset according to increased sales in clothing, pharmacy and food

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