Last Thursday’s 8.2 percent decline in the shares of Sears Holdings was, of course, a big blow to Edward Lampert’s ESL Partners, the embattled retailer’s biggest shareholder with roughly 52 percent of the shares.
But these days Sears is playing a bigger role in Lampert’s portfolio than it has for several years. This is because the hedge fund manager—who moved most of the operations of his firm, ESL Investments, to Bay Harbour, Florida, last year—has quietly streamlined his already concentrated portfolio.
Lampert, who earlier this year ranked sixth on the Institutional Investor’s Alpha Rich List after earning $750 million in 2012, recently reported that at the end of the second quarter, he had positions in only four U.S. stocks. He quietly purged the rest of the stocks, which mostly were small stakes.
Of course, Sears is still Lampert’s largest holding. But it now accounts for just about half of his equity assets, which were reduced to $3 billion from $4 billion at the end of March and $6.4 billion in March 2012.
In prior quarters, Sears accounted for closer to 40 to 42 percent of its much larger asset base. And although Sears’ stock at one point this year was up 44 percent, it has sharply retreated and is now down $2 from its year-end price, thanks in part to Thursday’s report that it lost money in the most recent quarter on weak sales.
Lampert’s other three stocks, however, have been faring much better this year. Longtime holding AutoNation, which now accounts for nearly 30 percent of assets, is up about 18 percent for the year. Gap, which accounts for 14 percent of assets, is up about 34 percent.
Sears Hometown and Outlet Stores, a home appliance and gardening supplies chain spun off from Sears last October, is up about 22 percent for the year after dropping about 3 percent on Friday. It accounts for a little more than 8 percent of assets. Add it all up, and Lampert’s stock portfolio is up only about 10 to 11 percent so far this year.
What did Lampert dump from his portfolio? At the end of the first quarter, he had very small positions in Capital One Financial Corp., Genworth Financial, iStar Financial and Orchard Supply Hardware, which was spun off from Sears in January 2012. At year-end he also owned small stakes in retailer Big Lots Stores and supermarket chain Safeway.
ESL, founded in 1988, earlier reported it managed a total of $5.1 billion as of December 31. In the past year or so, it reportedly returned about $1 billion to clients in the form of shares of some of its holdings, and Lampert has used some of his own capital to buy Sears shares for his own account.
In April, ESL reported in a regulatory filing that ESL Partners and its offshore fund and certain special purpose liquidating entities held by former investors of the funds held about $5.5 billion in assets.
