Eddie Lampert: Risk Coming Back to Markets (Interview)

This morning on CNBC, Eddie Lampert was interviewed on a myriad of topics. The chairman of Sears Holdings (SHLD) and hedge fund manager of ESL Investments/RBS Partners says that risk is 'coming back' to markets.


On Risk & the Markets

With the low interest rate environment, Lampert tosses out a quote we've heard a lot over the past few years: "They (investors) want a return on their money rather than just a return of their money."

David Bonderman, founding partner of Texas Pacific Group (TPG) also joined the conversation and argued that "the economy is better than you think it is ... the US is not in trouble in the short-term, maybe the long-term is another story."


On Bricks & Mortar Retail

Lampert notes that the "world is very different" and certain great iconic American brands like Disney (DIS) have had success, while there's others that need reinvention (JC Penney, Sears, etc).

The Sears chairman mentions that both retail and media are in re-invention mode, saying some companies will have "profitless prosperity."

He also argues that another one of the businesses he owns in size, Autozone (AZO), is a great retail business because it's less affected by internet competition. If something's wrong with your car and you need a new part, you need it now rather than waiting a few days for it to arrive via shipping.

Embedded below are the videos of Eddie Lampert's interview (email readers click to come view):

Video 1:


And Video 2:



There were a bunch of rare appearances on CNBC this morning, so don't miss:

- John Phelan of MSD Capital on the economy & markets

Eddie Lampert Buys AutoNation (AN) Shares

In a Form 4 filed with the SEC, Eddie Lampert's hedge fund firm RBS Partners has updated their stake in AutoNation (AN). Lampert has boosted his holdings by acquiring 137,143 shares on April 9th at a weighted price of $18.2887, 134311 shares on April 12th at $18.2963, and finally 320,985 shares on April 13th at $18.2891 per share. In total, RBS Partners recently purchased 592,459 shares of AN. After all their purchases, Lampert's RBS now owns 59,441,500 shares of AutoNation.

Keep in mind that he also bought shares in his other investment vehicles as well (ESL Investors, ESL Institutional Partners, etc). These purchases were on a smaller scale on the same dates and around the same prices. The overwhelming majority of his position though is held via his hedge fund RBS Partners. Lampert of course recently graced Forbes' billionaire list.

Lampert is known for taking highly concentrated positions in companies and his most notable stake is in Sears Holdings (SHLD) where he has helped orchestrate a turnaround for the company. Before founding his hedge fund, he worked with Robert Rubin at Goldman Sachs' risk arbitrage desk. Make sure to check out Eddie Lampert's RBS Partners portfolio as well as Lampert's annual letter.

Taken from Google Finance, AutoNation is "is the automotive retailer in the United States. As of December 31, 2009, the Company owned and operated 246 new vehicle franchises from 203 stores located in the United States. Its stores sell 33 different brands of new vehicles. It offers a range of automotive products and services, including new vehicles, used vehicles, parts and automotive services, and automotive finance and insurance products. It operates in three segments: Domestic, Import and Premium Luxury."

Eddie Lampert's Hedge Fund RBS Partners: Portfolio Update (13F Filing)

(This post is part of our series on tracking hedge fund portfolios. If you're unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund 13F filings.)

Next up is RBS Partners, the parent company of Eddie Lampert's hedge fund ESL Investments. Prior to forming ESL, Lampert worked with Robert Rubin at Goldman Sachs risk arbitrage department. Prior to that, Lampert graduated from Yale where he was a member of the skull and bones secret society, as well as Phi Beta Kappa. Lampert runs highly concentrated portfolios and his focus has long been on the retail sector. He has graced Forbes' billionaire list but was one of the top hedge fund losers in 2008.

Recently, we posted up some interesting activity out of Lampert's investment vehicles. And in the past, we've also covered Eddie's 2009 annual letter. Interestingly enough, Richard Rainwater has dubbed Lampert "the greatest investor of his generation."

The positions listed below were RBS Partners' long equity, note, and options holdings as of December 31st, 2009 as filed with the SEC. All holdings are common stock unless otherwise denoted.


Brand New Positions
CIT Group (CIT)
Wells Fargo (WFC)
Bank of America (BAC)


Increased Positions
Sears Holdings (SHLD): Increased by 27.8%
Acxiom (ACXM): Increased by 22.1%
Citigroup (C): Increased by 14%
Autozone (AZO): Increased by 8.1%
Autonation (AN): Increased by 5.9%
Capital One (COF): Increased by 5.3%


Reduced Positions
SLM (SLM): Reduced by 12.1%
Genworth Financial (GNW): Reduced by 5%


Removed Positions (Sold out completely):
n/a


Top Holdings by percentage of assets reported on 13F filing

1. Sears Holdings (SHLD): 49.9%
   
2. Autozone (AZO): 28.9%
   
3. Autonation (AN): 13.8%
   
4. Capital One (COF): 3.3%
   
5. CIT Group (CIT): 1.1%
   
6. Citigroup (C): 0.9%
   
7. Genworth Financial (GNW): 0.9%
   
8. Wells Fargo (WFC): 0.4%
   
9. Acxiom (ACXM): 0.3%
   
10. SLM Corp (SLM): 0.3%
    
11. Bank of America (BAC): 0.1%
    

Eddie Lampert's hedge fund is the definition of a concentrated portfolio. But, that's what happens when you effectively takeover a company (in this case Sears). Many compared Lampert to Warren Buffett a few years ago, but those comparisons have gone by the wayside as Lampert has struggled to generate the returns many thought he was capable of. While he has definitely helped engineer Sears' recovery, the job is by no means done.

They sold a slight amount of SLM and added modestly to their Sears, Acxiom, and Citigroup stakes. Citigroup has made a lot of headlines as of late on our site, mainly due to the fact that lots of hedge funds have been adding C. Additionally, Eddie Lampert shows a new stake in CIT Group. But, just as we've noted with all the other hedge funds that now show this stake, it is most likely due to a debt to equity conversion. Lampert also shows new (small) stakes in Wells Fargo (WFC) and Bank of America (BAC).

That about wraps up his portfolio because as Sears goes, Lampert goes. All data used for this article comes from Alphaclone. It's by far the best hedge fund replicator we've ever used and they of course pull data directly from the SEC filings so that you can backtest tons of strategies. RBS Partners' assets reported on the 13F filing were $11 billion this quarter compared to $9.3 billion last quarter. As you can see, that's almost a $1.7 billion increase in assets invested long in US equities. Remember that these filings are not representative of the hedge fund's entire base of AUM.

We'll be tracking 40+ prominent funds in our fourth quarter 2009 hedge fund portfolio tracking series. We've already covered Seth Klarman's Baupost Group, Mohnish Pabrai's Investment Fund, Carl Icahn's hedge fund Icahn Partners, David Einhorn's Greenlight Capital, Stephen Mandel's Lone Pine Capital, John Griffin's Blue Ridge Capital, David Tepper's Appaloosa Management, Warren Buffett's portfolio, John Paulson's hedge fund Paulson & Co, Lee Ainslie's Maverick Capital, and Dan Loeb's Third Point. Check back daily for our new updates.

Eddie Lampert Distributes Sears, AutoZone, & AutoNation Shares

The following is a guest post from StreetCapitalist.com, a site focused on event driven value investments.

As most of you know, Eddie Lampert's investment vehicles ESL Investments and RBS Partners have substantial stakes in three businesses: Sears Holdings (SHLD), AutoZone (AZO), and AutoNation (AN).

(HT: Matt Miller) On January 11, his investment vehicles filed three SEC Form 4 filings, detailing an interesting transaction.

Sears Holdings

ESL Institutional Partners, L.P. (“Institutional”) distributed these shares of common stock, par value $0.01 per share, of Sears Holdings Corporation (“Shares”) to its general partner, RBS Investment Management, L.L.C. (“RBSIM”), in an in-kind pro rata distribution for no consideration. RBSIM then distributed these Shares to its members in an in-kind pro rata distribution for no consideration. RBS Partners, L.P. (“RBS”) distributed these Shares to its partners in an in-kind pro rata distribution for no consideration. ESL Investment Management, L.P. (“ESLIM”) distributed these Shares to its partners in an in-kind pro rata distribution for no consideration. These Shares include 3,565,316 Shares distributed by RBS in an in-kind pro rata distribution for no consideration, 244,153 Shares distributed by RBSIM in an in-kind pro rata distribution for no consideration and 15,678 Shares distributed by ESLIM in an in-kind pro rata distribution for no consideration. As a result of these distributions, Mr. Lampert directly holds Shares in which he previously had an indirect interest. The distributions did not change Mr. Lampert’s overall pecuniary interest in securities of Sears Holdings Corporation. (Sears Holdings SEC Form 4).

AutoZone

ESL Institutional Partners, L.P. (“Institutional”) distributed these shares of common stock, par value $0.01 per share, of AutoZone, Inc. (“Shares”) to its general partner, RBS Investment Management, L.L.C. (“RBSIM”), in an in-kind pro rata distribution for no consideration. RBSIM then distributed these Shares to its members in an in-kind pro rata distribution for no consideration. RBS Partners, L.P. (“RBS”) distributed these Shares to its partners in an in-kind pro rata distribution for no consideration. These Shares include 792,882 Shares distributed by RBS in an in-kind pro rata distribution for no consideration and 48,659 Shares distributed by RBSIM in an in-kind pro rata distribution for no consideration. As a result of these distributions, Mr. Lampert directly holds Shares in which he previously had an indirect interest. The distributions did not change Mr. Lampert’s overall pecuniary interest in securities of AutoZone, Inc. (AutoZone SEC Form 4).

AutoNation

ESL Institutional Partners, L.P. (“Institutional”) distributed these shares of common stock, par value $0.01 per share, of AutoNation, Inc. (“Shares”) to its general partner, RBS Investment Management, L.L.C. (“RBSIM”), in an in-kind pro rata distribution for no consideration. RBSIM then distributed these Shares to its members in an in-kind pro rata distribution for no consideration. (AutoNation SEC Form 4).


These transactions all appear to be doing the same thing, taking major holdings of ESL/RBS and giving them to investors in their funds. The reasons for doing such a transaction can vary. Think back to when Warren Buffett decided to unwind his partnership. He liquidated assets, paying a small dividend, and also distributed shares of Berkshire — which he was chairman of. For an investor in his partnership, they could either keep their faith in him and hold on to their Berkshire shares or sell. You all know how that turned out. We also note that William C. Crowley made similar filings. Crowley is Executive Vice President and Chief Administrative Officer at Sears Holding Corporation.

For Lampert, there could be other reasons too. Some funds that take controlling stakes and then decide to wind down find it more efficient to distribute out large holdings rather than sell them onto the open market. Or, it could be a way to give investors in the fund an opportunity to be extricated from having such large holdings have a dominant influence on returns. This will be a situation to watch for any Sears, AutoZone, or AutoNation holder.


The above was a guest post from StreetCapitalist.com, a site focused on event driven value investments.

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For more coverage of SEC filings, check out our series of hedge fund portfolio movements where we track the portfolios of some of the most prominent investors out there.

Eddie Lampert Lost $30 Million an Hour

According to the NY Post's calculations, Eddie Lampert (ESL Investments) has lost $30 million an hour from his top 9 holdings since September 19th (26 trading days). Some of these top holdings include Sears (SHLD), Autozone (AZO), Autonation (AN), and Citigroup (C). The Post writes,

"Lampert's Greenwich, Conn.-based ESL Investments saw its holdings in the eight companies fall by an average of $193 million each trading day - which translates into $30 million an hour for each of the 6 1/2-hour trading days.

The investor lost about $587 million on Auto Nation, $480 million on AutoZone, $174.7 million on Home Depot and $162.4 million on Citigroup. The group of nine companies fell 39.4 percent over the 26 trading days - compared with a 26.4 percent drop for the Dow Jones industrial average."

Value is dead in this environment.

Source: NY Post