| Edward Lampert, ESL Investments (Bloomberg) |
Who would have thought? In what was an otherwise lousy week for stocks in general, one investor is surprisingly not complaining: Edward Lampert, founder of Bay Harbor Islands, Florida-based ESL Investments.
Lampert’s stakes in Sears Holdings Corp. and three of its spinoffs all surged in price in the past week or so, without much news to fuel this unlikely move.
The stock price increases came the same week Lampert personally added to his stakes in two of the companies.
For example, Sears Holdings is up more than 16 percent over the past six trading days. Sears Hometown and Outlet Stores is up more than 18 percent in the past five trading days. Lands’ End is up nearly 9 percent in five days.
Seritage Growth Properties, which had been trading in the mid-$30 range for most of the month, suddenly jumped nearly 17 percent on Thursday alone after Warren Buffett said in a regulatory filing that he had taken an 8 percent stake in the real estate investment trust (REIT), which was created earlier this year to monetize some of Sears’ real estate.
Even so, Lampert is not exactly whooping it up. With less than three weeks of trading left in the year, most of his disclosed long stocks are still way underwater for the year, while one significant holding is barely profitable.
As a result, Alpha estimates ESL is down 35 percent or 36 percent in 2015, excluding any cash it may have in the fund. This makes it the worst- or one of the worst-performing hedge funds this year.
At the end of September, Lampert’s firm had roughly $1.6 billion in its U.S. long stock portfolio. This was down 29 percent from more than $2.2 billion at year-end. Altogether, the firm had positions in eight different stocks.
Hoffman Estates, Illinois-based Sears Holdings, which was once the nation’s largest retailer, is down about 33 percent for the year. It accounted for about 37 percent of disclosed U.S. long assets.
Dodgeville, Wisconsin-based Lands’ End, spun off from Sears in April 2014, is down 57 percent for the year. It accounts for 11 percent of assets. Toronto-based Sears Canada, a slightly smaller holding than Lands’ End, is down 40 percent.
Sears Hometown and Outlet Stores -- the Hoffman Estates, Illinois-based retailer of home appliances, lawn and garden equipment, tools and hardware spun off by Sears Holdings in October 2012 -- is off 36 percent for the year. It accounted for only $38 million of assets, however, at the end of the third quarter.
Meanwhile, at the end of the third quarter, ESL owned a $112 million stake in San Francisco-based Gap, an investment it has held since the second quarter. It is not publicly known exactly when ESL bought the stock and what price it paid. However, the stock is down 65 percent since March 31 and 32 percent since June 30. For our estimate of ESL’s year-to-date performance, we used the smaller loss.
In addition, a new small position ESL took in Armonk, New York-based IBM Corp. in the third quarter is down more than 16 percent since the end of June and more than 6 percent since the end of September.
In fact, ESL’s only profitable significant position is its stake in Fort Lauderdale, Florida-based AutoNation, the nation’s largest auto retailer, which accounts for roughly one quarter of ESL’s U.S. stock assets. However, its stock is up less than 2 percent for the year. And while Seritage is up 11 percent, ESL holds a puny $16.5 million stake.
Keep in mind that not all ESL investors who have bailed out in recent years have enjoyed a clean break. In its ADV filing at the end of 2014, ESL pointed out that it had a total of $3.7 billion contained in ESL Partners as well as special-purpose liquidating entities held by former investors of ESL Partners and ESL Ltd. So these disenchanted former investors have not been able to fully redeem from the man BusinessWeek once called the next Warren Buffett.
