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Eddie Lampert Is All In on Retail

Michael B. Lewis
November 20, 2012

Hedge fund manager Eddie Lampert is best known for his investment and management of Sears Holdings (NYSE: SHLD  ) . Though his investment in the company has yielded substantial gains for the fund manager, many other investors think the job wasn't handled properly. Aside from Sears, Lampert's fund, ESL Investments, has plenty of interesting positions, from retail to technology. Let's take a look at the most recent reported holdings for the chairman of Sears and the value investing extraordinaire.

ESL Investments is the fund that took control of companies such as Sears and AutoNation (NYSE: AN  ) in attempt to turn around their eroding fundamentals and dying businesses. Lampert enacted change by amassing large amounts of stock and eventually placing himself on the companies' boards. Lampert is a value investor with some similar criteria to that of Warren Buffett. He likes simple business models that generate lots of free cash and look to do so for the foreseeable future. Where he differs with the Oracle of Omaha, though, is on management. Where Buffett would turn away a cheap business with a lousy management team, Lampert would gladly invest and then take action to change or influence the current executives.

As of RBS Partners' (the parent company behind ESL) latest 13-F  filing, it appears that Lampert is, as usual, heavily consolidated in just 10 substantial positions. A few of these are the predictable, gigantic holdings of Sears, AutoNation, and an almost closed out position in AutoZone (NYSE: AZO  ) . Those three stocks all together make up more than $4 billion, or more than 80%, of the entire portfolio.

The third biggest position in the fund is in clothing retailer Gap (NYSE: GPS  ) . Over the past year, Gap has been a great comeback story. In its recent earnings report, the retailer made tremendous gains with  $0.63 per share compared with $0.38 the year before. The growth was driven by higher sales, improved margins, and a lower share count. Same-store sales for Gap were up 7% year over year, followed by 6% for subsidiary Banana Republic and 9% for Old Navy. Lampert  has steadily been reducing his Gap holdings, while still maintaining nearly 20  million shares. He originally purchased shares in the early months of 2011 -- amassing a nearly