A Few Financials Eddie Lampert Likes

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 |  Includes: ACXM, AN, AZO, C, CIT, COF, GNW, HD, HIG, HSNI, SHLD, SLM
by: The Manual of Ideas

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 (NASDAQ: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 (NYSE:COF), Genworth Financial (NYSE:GNW) and AutoZone (NYSE: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%

Click to enlarge

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%

Click to enlarge

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

Click to enlarge

New Positions

  • Genworth Financial
  • HSN (NASDAQ: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.