Eddie Lampert's Most Recent Investment Activity

 |  Includes: AZO, BIG, CIT, COF, GPS, STAR, STX
by: Trader 24821

Eddie Lampert has been called "the next Warren Buffett" due to similarities between both of their investing styles concerning value and having holding periods of many years to decades.

He simply gained fame by founding his hedge fund ESL Investments, now referred to as RBS Partners, in 1988 and since that time averaged an astounding 29% annual returns. Making his net worth as of March 2011 an estimated $3.6 billion. He simply knows to make money picking stocks, so let's look at his recent actions and see how we can benefit.

The Gap, Inc. (NYSE:GPS) operates as a specialty retailing company. Lampert increased his already sizeable position (as I brought up here recently) by almost 20% to 36.3M shares. GPS still has attractive valuations at a trailing and forward 10x P/E, 0.6x P/S and EV/S, 3.7x EV/EBITDA, strong FCF of approximately $1.2B this past year, and nice 2.4% growing and consistent dividend. I'd be a buyer of GPS as well.

Seagate Technology (NASDAQ:STX) designs, manufactures, markets, and sells hard disk drives for enterprise, client compute, and client non-compute market applications. Lampert added over 35% to his position now holding 9.73M shares. This is also a large holding of Greenlight Capital (as shown here) and still has nice valuations at a trailing 14x P/E, 5.5x forward P/E, 0.4x PEG, 0.6x P/S and EV/S, 4.7x EV/EBITDA, and very nice 4.5% dividend yield. I think STX is a buy.

Big Lots (NYSE:BIG), through its subsidiaries, operates as a broad line closeout retailer in the United States. Lampert added aggressively to his position over 44% and now holds 1.87M shares. This company is a great holding in this depressed economy and has nice valuations at a trailing 13x P/E, 11x forward P/E, 1x PEG, 0.5x P/S and EV/S, and 6x EV/EBITDA.

CIT Group (NYSE:CIT) operates as the holding company for CIT bank, which provides commercial financing, leasing products, and other services to small and middle market businesses. Lampert added a little to his existing large position and now holds 5.78M shares. I don't quite see the value of this company thought trading at a trailing 79x P/E, 26x forward P/E, 9.5x PEG, 16x EV/S, and no dividend yield. It trades at a nice 0.7x P/B, but has been having anemic to negative rates of returns and am still uncertain about financials. I wouldn't buy CIT quite yet.

iStar Financial (SFI) operates as a finance company focusing on the commercial real estate industry. This REIT is trading right near their lows, but I don't see much value when it lost $114M in net income this past year, burned over $90M in FCF this past year, and pays no dividend. The company trades at a tempting 0.3x P/B, but looks to me to be a value trap as SFI has had negative rates of return and their industry is still struggling.

AutoZone (NYSE:AZO) engages in retailing and distributing automotive replacement parts and accessories. Lampert sold just over 5% of his very large position of 8.92M shares. AZO looks a little pricey at almost 10x EV/EBITDA, 2x EV/S, and a trailing 17x P/E, while paying no dividend. Moreover, AZO has a negative BV/share of over $30, which is worrisome to me as well as I mentioned here. I'd stay away for now at these elevated levels.

Capital One Financial Corporation (NYSE:COF) operates as the bank holding company for the Capital One Bank. Lampert sold a little over 5% of his position and now holds 5.93M shares. This relatively well-run financial firm has attractive valuations at a trailing 5x P/E, 6x forward P/E, 0.5x PEG, 0.7x P/B, and 1.3x P/S. Moreover, the company pays a low 0.5% dividend yield, but that is a paltry 3% payout ratio, indicating that future dividend hikes are likely. I'd follow Lampert and hold COF as well.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in GPS, COF over the next 72 hours.