Mysterious Signals Emanating From Eddie Lampert
A lot of investors follow trading activity of certain hedge fund managers so they can buy like the billionaires and, hopefully, make a lot of money just like the big guys do.
In the case of Edward Lampert, however, it may be more lucrative to buy what he’s selling.
Wrong-way Lampert? It’s a cruel turn of events for the billionaire, once shined up by Businessweek as the next Warrem Buffett
In January and March, Lampert personally bought more shares of Sears Holdings (SHLD), the troubled retailer he took a major stake in eight years ago and now runs. For most of the years following, Sears was a dog of an investment for Lampert and other investors who followed him into it.
On the other hand, Lampert funds RBS Partners, ESL Investments and ESL Partners cut their stakes in several companies where they had found greater success. Those sales included significant numbers of shares of Genworth Financial (GNW) and AutoNation (AN), as well as a reduction in Capital One Finance (COF) and Gap (GPS). RBS sold out completely of several companies, including Safeway (SWY) and AutoZone (AZO). Lampert bought these shares at various times – AutoZone purchases started in 1998 and Safeway barely three quarters ago, for example. The chart shows their performance in the past year.
Perhaps Lampert foresees these stocks cooling off, and he sold to get out before the masses. Or maybe the problems at Sears simply made taking profits elsewhere a quite practical thing to do. Sears shares are actually up about 14% so far this year, which matches S&P 500 gains. But none of the major investment banks are exuding confidence that those gains are permanent. Few analysts follow it closely now, and those that do have given the shares hold and sell ratings. With future performance of the big Sears holding in question, perhaps booking gains now in the better holdings seemed particularly prudent.
If Lampert’s trades were motivated more by profit taking than bearish sentiments, then his reduced (but not sold out) stakes might be worth some study. As it happens, Capital One shares are particularly popular with Wall Street analysts now and several value-based funds. Sam Peters at Legg Mason Value Trust has been buying those shares as well as shares of Genworth Financial. Genworth shares are up about 350% since Lambert’s first purchase in 2009, having more than doubled in the past 12 months alone. Analyst sentiment is mixed for Gap, but as YCharts pointed out recently, its fast-gaining shares are still cheaper than many big competitors.
Each of these makes a nice jumping off point for further company research.
There is one of Lambert’s recent investment decisions that investors might want to mimic directly. Lambert has been selling shares of Orchard Supply Hardware Stores (OSH), a retailer that has struggled to make money since Sears spun it off about a year and a half ago.
According to Bloomberg Businessweek, Lampert controlled about a 21% stake as of mid-May. Orchard’s recent SEC filings show Lampert selling its shares throughout May and as late as June 10. Bloomberg reported last week that the company was in talks with creditors and considering filing for bankruptcy.
Dee Gill, a senior contributing editor at YCharts, is a former foreign correspondent for AP-Dow Jones News in London, where she covered the U.K. equities market and economic indicators. She has written for The New York Times, The Wall Street Journal, The Economist and Time magazine. She can be reached at email@example.com. You can also request a demonstration of YCharts Platinum.
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