As the holidays approach, the retailer's $4.1 billion credit line should be sufficient to stock its shelves, given that it needed roughly $3 billion last year. But come March, the facility will shrink to just $2.4 billion. That could mean a dicey winter in 2010 if the economy remains tough.

In that case, Sears Holdings may want to extract cash from its Canadian business. Sears Canada is one of the largest retailers in the country and continues to build cash on its balance sheet. Of the parent's $1.292 billion in gross cash, $824 million belongs to Sears Canada, its 73% subsidiary.

Unfortunately, Sears Holdings can't touch the Canadian cash unless it buys the entire company. It tried a deal in 2006 but was blocked by Pershing Square Capital, which owns more than half of the 27% minority stake.

Since the standoff, Sears Canada has paid no dividends and let its cash sit idle. Locked in a strategic standstill, Sears Canada's shares have been depressed, trading at 12 times earnings for the year ending January 2011, according to brokerage Desjardins Securities in Toronto. Sears Holdings, meanwhile, has a multiple of 48 times consensus earnings.

Sears Holdings probably can't afford to attempt another squeeze out. Sears Canada has about $500 million in net cash, but the market value of the shares that Sears Holdings doesn't own is about $600 million. Paying any premium to satisfy Pershing would leave Sears Holdings with less cash.

More likely, Sears Holdings will need to shed the Canadian business. The question for investors is how long they are willing to wait.

- This so called problem doesn't arrive until Fall 2010 when they ramp up for Christmas. I believe Sears will see FCF in 2009 of $500 million and 2010 of over $500 million, at least, and therefore Sears won't die if their net $1.7 billion of financing is taken away in 2010. They can stop buybacks and self finance, though it won't be necessary; someone else will provide financing if necessary (see next bullet).

- I believe Bruce Berkowitz has said he would provide inventory financing for Sears if no one else will, though he thinks Sears can find it cheaper elsewhere.

- Regarding the minority Sears Canada stake. Sears and Ackman are playing the waiting game to see who will flinch first. I don't think SHLD feels any pressure to flinch at this point. Ackman may someday realize that he isn't in control of Sears Canada and can find better returns elsewhere. Ackman can double his money every 3.5 years with the 20% returns he gets (I believe they are 20%, or more). It doesn't make sense for him to hold out forever, though he might just do it.

Craftsman tools are sold at Fastenal.com. I haven't checked to see if they are sold in Fastenal stores yet, they may just be sold online, but I really like this move either way. From what I understand Fastenal is a highly regarded company/brand and it's exciting to see Craftsman teaming up with another great brand when branching out of the Sears/Kmart umbrella.

"Regardless of whether a company has a long history of dividend growth, a large acquisition financed by debt is cause for alarm bells to go off. Excessive debt can choke the company especially if the new asset requires "fixing". Unless a company has a great deal of experience with acquisitions, a quick & successful integration can be a problem especially if the company being acquired involves new areas of expertise."

• Immediately exclude financials (outside circle of competence)
• Run the companies through the Old School Value investment spreadsheet with the PE as the growth rate, but capped at 15%. The selected companies shall exhibit;

  
  - Positive, consistent and growing cash flows.
  - Consistent margins. Fluctuating/decreasing margins over several years will not be accepted unless the other criterias are outstanding. Above average returns from capital investments (CROIC, ROE, ROA)
  - Strong balance sheet

  
  
• Companies should have at least 5 years of operating history

Specialty retailer of hardwood flooring.

Too short history but the company makes good FCF and excellent CROIC. Looks to be trading a big premium with the growth it has exhibited but a company to keep an eye on should prices fall one day.

DCF Calculation: $14.31

Graham Formula Calculation: $11.32

EPV: $12.71

Operates a low-cost airline serving resort locales such as Las Vegas and Orlando.
Never liked airline companies. Top line may have increased but bottom line is still weak with barely any FCF consistency or growth.

DCF Calculation: $14

Graham Formula Calculation: $18.71

EPV: N/A

Creates software designed to automate and streamline administrative functions required for operating a medical or dental practices. My previous analysis of QSII showed how much I was wrong. My intrinsic value estimate was between $22-$36 while it is now trading at $63. QSII continues to grow at an amazing pace on both the top and bottom line.

• Awesome FCF generation, CROIC, ROA, ROE with zero long term debt
• It's growing at such a fast organic rate that I feel uncomfortable in trying to value the company as I have no way of knowing how long this growth will continue.

Provides post-acute health care services to patients through its home nursing agencies, hospices and long-term acute care hospitals.

• Big drop in tangible shareholders equity
• Excellent CROIC
• Excellent FCF growth
• Margins are volatile yoy but increasing trend

[b]DCF Calculation: $33

Graham Formula Calculation: $28.14

EPV: $25.81

Sells over 100 whole bean and ground coffee selections, hot cocoa, teas and coffees in K-Cup portion packs, Keurig single-cup brewers and other accessories.The Keurig single-cup brewers may be selling like hotcakes but I still don't see how it could be worth $73 as the market implies. A pure growth stock. I do not see fundamentals supporting it at all.

DCF Calculation:$4

Graham Formula Calculation: $10.19 (even with a 20% growth rate!)

EPV: $17.76

Provides medical transcription services to the healthcare industry.

• FCF fluctuating. No growth.
• Not a consistent performer
• Past 4 years has seen dramatic growth

DCF Calculation:$12.20

Graham Formula Calculation: $10.33

EPV: $7.26

Business of hosting and cloud computing.
Maybe I should switch my value investing blog to Rackspace.. hmm

• IPO'd last year
• Huge growth in customers, especially in the cloud computing area
• Another big growth stock in a growing industry/sector
• Not enough history and results to offer any reliable valuations

Develops and sells devices that use spintronics, a nanotechnology that relies on electron spin rather than electron charge to acquire, store and transmit information.

• Small company so the growth has been huge. Organically fast growing company.
• FCF growth huge
• CROIC is excellent as well
• Tangible shareholders equity has been increasing at an incredible rate
• Margins increasing at impressive rate

DCF Calculation:$37.45

Graham Formula Calculation: $24.67

EPV: $23.66

Provider of online postsecondary education directed at the needs of the military and public service communities.

• Short history to conclude but past 2 years has seen big improvements
• Big FCF growth past 2-3 years
• Tangible shareholders equity increasing
• Issued lots of stock in 2007
• No long term debt
• Growing cash position
• Big increase in margins

DCF Calculation:$15.55

Graham Formula Calculation: In the $7-8 range

EPV: $17.49

Develops, manufactures, markets, and sells X-ray inspection and other detection solutions for homeland security and other targeted markets.

• Growing cash balance
• Strong fundamental numbers
• FCF growth excellent at 33%
• CROIC is 13%
• Conversion from Sales to FCF is at 12%
• Cash from operations growth shows big increases
• Seems to be cyclical every 3 years

DCF Calculation:$62.49

Graham Formula Calculation: $70.01

EPV: $56