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Eddie Lampert’s ESL Investments has $9.1 billion in its portfolio, spread across a mere 12 stock positions. His strategy is to target businesses that are mature with strong cash flows. Lampert isn’t as concerned with the ability of the management team the way a value investor like Warren Buffett is. He doesn’t mind taking an activist role within a company. Lampert’s sole concern is how well the company can generate cash flow over the long term.

AZO Is Lampert’s Largest Holding After SHLD Falls in Price

As of the end of the third quarter, Lampert’s top holding was AutoZone Inc (AZO). He had 8,925,551 shares in the company at the end of September after reducing his stake by 533,751 shares. Lampert’s position in AZO is currently valued at $2.8 billion, just barely beating out his top position at the end of the second quarter – Sears Holding (SHLD).

Lampert didn’t add to or reduce his stake in SHLD in the third quarter. He still has the same 48,179,755 shares he had in the company at the end of June, but a change in the company’s value from an average price of $96.44 in the second quarter to an average price of $63.35 in the third quarter pushed the ranking of SHLD to the second position in Lampert’s portfolio. AutoNation (AN) remained Lampert’s third largest position.

Lampert’s Increased Positions

Eddie Lampert increased his positions in Gap Inc (GPS) by 19.52%, bringing ESL Investments’ total number of shares in the company to 36,286,240 shares at the end of September. The position is valued at $589.3 million or 6.5% of Lampert’s total 13F portfolio. In the third quarter, Lampert cut his stake in Capital One Financial (COF) by 5.23% while increasing his position in CIT Group (CIT) by 7.52%. These moves changed the weight of COF and CIT in Lampert’s portfolio but not the relative ranking of these companies within the portfolio. They are ranked fifth and sixth in Lampert’s portfolio, respectively.

Lampert Did Not Change Holdings in Cisco, Wells Fargo

Lampert did not change his holdings in Cisco Systems (CSCO), his seventh largest position, nor Wells Fargo (WFC), his eighth largest position. However, the value of the stocks changed. Lampert’s position in CSCO fell from $117.6 million to $116.8 million while his position in WFC fell from $129.9 million to $111.6 million. Wells Fargo is favored by several value investors like Warren Buffett, Bill Miller and Mohnish Pabrai.

Lampert also did not alter his stake in Genworth Financial (GNW), but the value fell significantly. He had the same 10,862,666 shares in the company at the end of the third quarter as he did at the end of the second quarter, but the value is much different. Lampert’s stake in GNW had been valued at $111.7 million at the end of June but was valued at just $62.4 million at the end of September.

Lampert’s Bullish Bets

In the third quarter, Lampert was most bullish on his smaller positions. He upped his stake in Seagate Technology (STX) by 35.04%, bringing his total stake in the company to 9,729,218 shares. David Einhorn has a large position in STX as well and the stock performed spectacularly since August, gaining more than 80%. Lampert also increased his position in Big Lots (BIG), boosting his stake in the company by 44.39% in the third quarter. IStar Financial (SFI) was Lampert’s only new position in the third quarter. He bought 1,916,826 shares. His position was valued at $11.2 million at the end of September.

Source: Billionaire Eddie Lampert's Top Stock Picks