A Few Financials Eddie Lampert Likes

Why follow Lampert?

Eddie Lampert, founder and managing member of ESL Investments, is a value investor who started out working under Bob Rubin at the arbitrage desk of Goldman Sachs. When he left Goldman to start ESL in 1988, he received the support of Texas investor Richard Rainwater. Lampert compounded ESL’s capital at rates of more than 25% per annum for many years. His largest investment was the much-publicized taking control of Kmart during Kmart’s bankruptcy process in 2002. Lampert engineered the merger of Kmart and Sears in 2004. He is currently chairman and chief capital allocator of the combined firm, Sears Holdings (SHLD). He also still manages his investment partnership, which holds a concentrated portfolio of companies meeting value-oriented criteria.

The Manual of Ideas estimates that Eddie Lampert’s top three ideas at this time are Capital One Financial (COF), Genworth Financial (GNW) and AutoZone (AZO). Our analysis is based on a recent Form 13F-HR filed by RBS Partners, the investment vehicle under which Lampert files Form 13F-HR with the SEC. We also consider RBS’s past 13F-HR filings, recent 13G and 13D filings as well as the latest market prices of the portfolio holdings. Please see below for an explanation of the MOI Signal Rank™ methodology. (Click charts to enlarge.)

MOI Signal Rank™ – Top Current Ideas of ESL Investments

MOI			Market	Price ($)	Shares Owned	Holdings
Signal			Value	Latest	Filing	Δ Since	Latest	Δ Since	As % of
Rank™	Company	Ticker	($mn)	Date	Date	Filing	Filing	9/30/08	Co.	Fund
1	Capital One	COF	4,713	12.11	31.89	-62%	9,875,523	no change	3%	4%
2	Genworth Financial	GNW	1,009	2.33	2.83	-18%	11,524,359	new	3%	0%
3	AutoZone	AZO	7,855	136.70	139.47	-2%	23,370,297	+2%	41%	42%
4	Sears Holdings	SHLD	4,821	38.99	38.87	0%	66,024,366	no change	53%	33%
5	Home Depot	HD	35,978	21.22	23.02	-8%	19,715,300	no change	1%	6%
6	AutoNation	AN	1,889	10.68	9.88	8%	79,721,834	+3%	45%	10%
7	CIT Group	CIT	1,104	2.84	4.54	-37%	15,406,937	>+100%	4%	1%
8	HSN	HSNI	259	4.60	7.27	-37%	21,187	new	0%	0%
9	Citigroup	C	19,021	3.49	6.71	-48%	19,083,800	no change	0%	2%
10	Hartford Financial	HIG	4,052	12.46	16.42	-24%	750,000	+36%	0%	0%

Top Holdings of ESL Investments – By Dollar Value

			Market	Price ($)	Shares Owned	Holdings
Size			Value	Latest	Filing	Δ Since	Latest	Δ Since	as % of
Rank	Company	Ticker	($mn)	Date	Date	Filing	Filing	9/30/08	Co.	Fund
1	AutoZone	AZO	7,855	136.70	139.47	-2%	23,370,297	+2%	41%	42%
2	Sears Holdings	SHLD	4,821	38.99	38.87	0%	66,024,366	no change	53%	33%
3	AutoNation	AN	1,889	10.68	9.88	8%	79,721,834	+3%	45%	10%
4	Home Depot	HD	35,978	21.22	23.02	-8%	19,715,300	no change	1%	6%
5	Capital One Financial	COF	4,713	12.11	31.89	-62%	9,875,523	no change	3%	4%
6	Citigroup	C	19,021	3.49	6.71	-48%	19,083,800	no change	0%	2%
7	CIT Group	CIT	1,104	2.84	4.54	-37%	15,406,937	>+100%	4%	1%
8	SLM	SLM	4,061	8.69	8.90	-2%	6,018,100	no change	1%	1%
9	Genworth Financial	GNW	1,009	2.33	2.83	-18%	11,524,359	new	3%	0%
10	Acxiom	ACXM	736	9.40	8.11	16%	3,293,989	no change	4%	0%

Portfolio Metrics

Portfolio Size	$7.8 billion
Top 10 Holdings % of Portfolio	99%
Median Market Cap ($mn)	$2.9 billion
Average Market Cap ($mn)	$7.7 billion
Average Dividend Yield	4%
Average P/E	15x
Average P/B	9.5x

New Positions

• Genworth Financial
• HSN (HSNI)

About MOI Signal Rank

MOI Signal Rank answers the question, “What are this investor’s top ideas right now?” Rather than simply presenting each investor’s largest holdings as of the recently filed quarter end, MOI’s proprietary methodology ranks the companies based on the investor’s current level of conviction in each holding, as judged by The Manual of Ideas.

Our proprietary methodology takes into account a number of variables, including the size of a position in an investor’s portfolio, the size of a position relative to the market value of the corresponding company, the most recent quarterly change in the number of shares owned, and the change in the stock price of a position since the most recent quarterly filing date.

For example, an investor might have the most conviction in a position that is only the tenth-largest position in such investor’s portfolio. This might be the case if an investor invests in a small company, resulting in a holding that is simply too small to rank highly based on size alone. On the other hand, such a holding might represent 19.9% of the shares outstanding of the subject company, suggesting a high level of conviction. Our estimate of the conviction level would rise further if the subject company has a 20% poison-pill threshold, thereby suggesting that the investor has bought as much of the subject company as is practically feasible.

Disclosures: None.

Comments

[PeteK:]

Very interesting portfolio.
GNW is top of my list.
HD is a steal right now.

Mar 12 05:10 AM