| Edward Lampert, ESL Investments |
Edward Lampert continues to reduce his stake in his portfolio’s best-performing stock, causing his most volatile holding to potentially become a bigger share of his Bay Harbor, Florida–based hedge fund, ESL Investments. On Thursday ESL and Lampert reported that earlier this week they sold a combined 550,000 or so shares of AutoNation for between $57.45 and $57.92 a share. AutoNation has been a huge winner for Lampert and ESL, which owned a combined 55 percent stake as recently as 2010. The stock is up 15 percent this year and has tripled since the end of 2009.
The latest sales of AutoNation mean that Sears Holdings Corp. theoretically becomes a bigger part of Lampert’s portfolio, however. And this year shares of the has-been retailer have been extremely volatile. At the end of the first quarter, Sears accounted for 57 percent of ESL’s disclosed portfolio. The stock is down nearly 18 percent this year. However, from its trough to peak this year alone, the stock surged 47 percent, while from peak to trough, it plunged 36 percent. And we’re only five months into the year.
Lampert’s two other big holdings of the past two years have also posted mixed results. This year Gap is up just 5 percent, while shares of Sears Hometown and Outlet Stores are down more than 10 percent. Add it up, and ESL is down in the mid- to upper-single digits this year. This makes it among the worst-performing hedge funds in 2014.
The AutoNation share sales came at the same time that the auto retailing giant reported its best May sales in eight years. This is at least the second time this year that Lampert and his fund pared their positions in the stock and at least the seventh time since the beginning of 2013.
After the AutoNation sales, ESL and Lampert owned a combined 26.1 million shares of the company, or 21.9 percent of the total outstanding. This includes more than 12 million shares held by ESL and 13.86 million shares held by Lampert. ESL had previously entered into a lockup agreement with Lampert that restricts the purchase and sale of this holding by Lampert.
Lampert also disclosed that on June 3 he gave a gift of 270,364 shares to the Edward and Kinga Lampert Foundation, which then sold a few thousand shares as well. Lampert and his wife, Kinga Keh Lampert, are co-trustees of the foundation.
Meanwhile, Sears has been all over the map. Since the end of 2012, shares of the company are down just 2.4 percent. However, partly because the stock jumped 18.6 percent last year, Lampert was able to make Alpha’s 2014 Rich List after earning $400 million in 2013. He made $750 million in 2012, partially because Sears managed a 30 percent-plus gain for the year. However, that year AutoNation, accounting for about one third of assets at the time, was up 34 percent. In 2012, when Lampert made that $750 million, Gap gained 67 percent, while Sears Hometown and Outlet Stores surged 45 percent after being spun off from Sears late that year.
It remains to be seen whether Lampert will land on the Rich List next time. But for the rest of the year, two things are likely to persist: Lampert will probably continue to sell his best stock, and shares of Sears will surge and sag for no discernible reason.
