Getting Greedy While Investors Remain Fearful: Kohl's Corporation (KSS)
Back Up The Truck
I believe I have a slam dunk of an investment idea to present to my readers today. One of Warren Buffet’s most famous pieces of advice is “to be fearful when others are greedy and to be greedy only when others are fearful.” This in and of itself suggests that value investors should not be afraid to hold contrarian investment views that other people would dismiss, often before even considering the merits of such views. Today I bring to you an investment thesis on the Kohl's Corporation (NYSE: KSS 0.00%↑) that I believe every investor needs to hear.
My investment thesis for KSS is a fairly simple and straight forward one. Below I will lay out the basics. KSS has a net asset value of $33.99 per share but is currently only selling for $12.85 per share. This represents a 165% upside between the company’s current share price and net asset value. That being said, KSS owns a very large amount of real estate that is clearly worth much more than the company’s balance sheet would suggest.
KSS has a rather large $353 million bond repayment due this July but currently only has $174 million in cash and cash equivalents on their balance sheet. Investors are worried that the company will be unable to pay back this debt causing the business to default, which would then trigger bankruptcy proceedings. To prevent this KSS announced on January 10th, 2025 that they would be closing 27 underperforming stores as well as their San Bernardino E-commerce Fulfillment Center, which is leased. I believe it’s pretty clear that KSS will try and sell off these properties in order to raise liquidity to be able to pay off their upcoming bond payment.
If KSS is successfully able to make their bond payment on time, investors will have some of their near term fears eased and the company’s share price will almost certainly rise from this good news. If KSS somehow defaults, their share price will bottom out but, should the company be forced to liquidate all of its assets, investors who bought in at share prices way under the company’s net asset value should expect to see capital returned to them in excess of what they originally paid. Again when you are buying into KSS at $12.85 a share you are buying $33.99 worth of value, a classic value investment play.
The main points of my thesis are…
KSS has a net asset value of $33.99 per share but is currently only selling for $12.85 per share, a 165% upside. The company’s net asset value is likely worth a lot more than this as the company owns 409 Kohl's stores as well as 13 Distribution and or E-commerce Fulfillment Centers.
KSS has a rather large $353 million bond payment due in July but currently only has $174 million in cash and cash equivalents on their balance sheet.
KSS announced January 10th, 2025 that they would be closing 27 underperforming stores, these will be sold to shore up cash for the company’s upcoming bond payment.
If KSS is successfully able to make their bond payment on time, investors should expect a rather large rise in the company’s share price.
If KSS somehow defaults, KSS’s share price will bottom out. Should KSS be forced to liquidate its assets to payback its debt holders, investors who bought in at share prices way under the company’s net asset value should expect to see capital returned to them in excess of what they originally paid.
Right now that figure appears to be $33.99 worth of capital at just $12.85 per share. For me this is a high enough net asset value above the company’s share price to warrant a BUY rating. I will personally be purchasing some Kohl’s for myself.
KSS is not a “hold onto this stock forever” type of investment. KSS is a trade. As the company successfully pays off their debt, which is extremely likely, I will probably sell off my shares. If KSS defaults, I will be waiting for their bankruptcy proceedings to play out, possibly buying more stock as the share price continues to drop.
Disclosure: I am long Kohl's Corporation ( KSS 0.00%↑ ) and will buy or sell my shares anytime following this article. This is not financial advice. I am not a financial advisor. Do your own research.