Fast Eddie Lampert Bets on Housing, Mortgages

Ed Lampert, CEO of Sears Holdings (SHLD) has been called the next Warren Buffett:

"Billionaire hedge-fund manager Edward S. Lampert is placing new bets on a U.S. housing recovery, buying stakes in beaten-up home builders, mortgage lenders and a home-improvement retailer.

Mr. Lampert’s ESL Investments Inc., which owns half of department-store giant Sears Holdings Corp. and 40% of car retailer AutoNation Inc., has previously focused with mixed success on retail and bank stocks.

Recently, the Greenwich, Conn., hedge fund, which controls investments it valued at about $11.6 billion in its most recent government financial report, began picking up shares in hard-hit housing-related stocks. ESL acquired small stakes in U.S. home builders Centex Corp. and KB Home, according to its latest Securities and Exchange Commission filings. At recent prices, the stakes in the two home builders are valued at $10.4 million and $10.8 million, respectively.

ESL also is tip-toeing into mortgage origination and servicing, acquiring about four million shares of CIT Group Inc., a struggling subprime home and commercial lender, as well as 1.4 million shares of PHH Corp., a mortgage originator and mortgage-service company. The shares are valued currently at about $35.5 million and $25.2 million, respectively. ESL spokesman Steve Lipin declined to comment on the investments."

AutoNation (AN), CIT Group (CIT), KB Homes (KBH), PHH Corp (PHH), Centex Homes (CTX), Home Depot (HD)

Somehow, I don’t think Buffett is buying any of those names . . .


"The Next Warren Buffett?"

Lampert Puts Money On Housing Rebound
Stakes Being Taken In Battered Builders, Lenders and Retailer
WSJ, June 12, 2008

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What's been said:

Discussions found on the web:
  1. shrek commented on Jun 11

    Time to get on your clown suit Eddy!

  2. dano commented on Jun 11

    maybe his will be the first big hedgie to blow? i certainly wouldn’t be making those kinds of bets now…

  3. a guy called john commented on Jun 11

    i thought his real estate play was buying k-mart…

  4. dryfly commented on Jun 11

    Well if some of those companies don’t go bankrupt then someday they will be worth something and he will look like a genius.

  5. Bob A commented on Jun 11

    If I was using his money I’d buy somea those too.

  6. TomD commented on Jun 11

    Adios, Eddie. Who was the idiot who first called him “the next Warren Bufett”? Obviously undeserved (ref. Sears), but it’s what reverberates in all our brains as soon as we see his name. I want his PR firm.


  7. Todd commented on Jun 11

    Seems like insignficant amounts when you’re talking about $10 million positions to me. That’s bar money for him. A non-event.

  8. simon commented on Jun 11

    Thats right.. a conservative bet with additional buys after positive moves followed by a correction…close attention to moves and a firm exit strategy. He should hire me.

  9. simon commented on Jun 11

    Come to think of it I would not hire me as an investment adviser so that’s a negative indicator.

  10. christofay commented on Jun 11

    With this latest batch of investments in home builders and mortgage related cos, he looks too early. But what do I know, if smarts is measured by dollars, then he has me beat.

    On his earlier investment in KMart/Sears, he looks too late. Maybe there is value there for the amount of fees that he pulled out of those investments. However the environment is there are way too many stores and too many retailers in identical formats/price spaces. Unless he has been cleaning up through some other means, it looks like his Sears/KMart investment is too late. He bought it for the real estate, but there is too much retail.

  11. Owner Earnings commented on Jun 11

    “Somehow, I don’t think Buffett is buying any of those names . . .”

    Buffett learned his lesson early with none other than, Berkshire Hathaway, the textile manufacturing disaster.

    Eddie may never learn his lesson.

    Him and Bill Miller at Legg Mason may go down as managers that got lucky 15 years in a row and then lost it all when their luck ran out.

  12. attila hooper commented on Jun 11

    Sears ? AutoNation ? You have to be kidding.

    When was the last time you were in Sears ? THey haven’t fixed the problems they had since their last BK. Walking through a Sears store in my neck of the woods is like playing a starring roll in ‘Dawn of the Dead’.

    Used cars and homebuilders ? Camels are coping a better bid and unemployed white collars are gonna be shooting it out for a crack den in the projects.

  13. Andy Tabbo commented on Jun 11

    This sounds like a nice doubling-down when you’re down strategy…

    “I’M DUE, BABY!!!!”

    On a serious note, I actually advocate these kinds of uber-cotrarian trades and I’m actually considering buying a few airlines….

    However, when you’re a contrarian trader you have to trade really small….so, as long as he’s trading small he should be “OK”

    – AT

  14. Hangtown commented on Jun 11

    I have some ocean front property in Phoenix he might be interested in.

  15. bob2 commented on Jun 11

    he bought the two worst retailers sears/kmart and did nothing with them. they’re still the same two lousy retailers. how SHLD ever got as high as it did is beyond me.

    he could have done something with them as a real estate play, but he didn’t and now its too late. commercial real estate is starting to tank.

    the next buffet. i don’t think so

  16. KJ Foehr commented on Jun 11

    I figured Lampert was way overrated when I heard Cramer say Eddie was his pal, just like his college roommate Eliot Spitzer.

  17. brian commented on Jun 11

    1st quarter 2008 CA numbers had 1,200 NODs PER DAY…and this guy is buying homebuilders and mortgage companies. Good luck with that.

  18. stuart commented on Jun 11

    June 9, 2008
    Central bank body warns of Great Depression

    by Gill Montia

    Story link: Central bank body warns of Great Depression

    The Bank for International Settlements (BIS), the organisation that fosters cooperation between central banks, has warned that the credit crisis could lead world economies into a crash on a scale not seen since the 1930s.

    In its latest quarterly report, the body points out that the Great Depression of the 1930s was not foreseen and that commentators on the financial turmoil, instigated by the US sub-prime mortgage crisis, may not have grasped the level of exposure that lies at its heart.

    According to the BIS, complex credit instruments, a strong appetite for risk, rising levels of household debt and long-term imbalances in the world currency system, all form part of the loose monetarist policy that could result in another Great Depression.

    The report points out that between March and May of this year, interbank lending continued to show signs of extreme stress and that this could be set to continue well into the future.

    It also raises concerns about the Chinese economy and questions whether China may be repeating mistakes made by Japan, with its so called bubble economy of the late 1980s.

  19. CDizzle commented on Jun 12

    My two cents: Smacks of a person who doesn’t need to be right but would rather be wrong about these specific bets than wrong about something mundane…

    …and, his track record (to date) speaks for itself, not that I can see it from the back row of the peanut gallery.

  20. David Merkel commented on Jun 12

    I do a lot with sector rotation and value investing. Of the six names, I could see one of them making sense — AutoNation. It’s not just new auto sales, but used sales and service, and a few other things.

    Still earning money, priced below book, earnings estimates have come down, but the price has come down more, and a reasonable balance sheet.

    But the rest? No way. Wrong industries, no matter how cheap they are, they are to be avoided.

  21. J Cauchy commented on Jun 12

    The only cool thing Eddie ever did was talk his way out of the kidnapping. Just say no to ESL.

  22. j commented on Jun 12

    4 investments totalling $80 million , in a fund with $20B in assets…..

    just pennies for Eddie and his investors

    time will tell if he’s right , and I would bet that he will be

  23. John commented on Jun 12

    Actually I think CIT would be right up Buffet’s street. It’s a bread and butter business financing backhoes and printing machines. They got into trouble when they strayed from their core mission. Warren has the cash to restore their liquidity once they finish unloading the junk which is a process well advanced. As for Lampert the sooner he gets out of the retail business the better. He’s busy destroying an iconic US business which in more intelligent hands could have made it back.

  24. zackattack commented on Jun 12

    You know what’s almost a universal?

    Every one of those charts is just hanging in the air about 15% above any reasonable support. Except CTX, which is making new lows.

    I wouldn’t buy any of these here. But then, I believe you simply can’t take anything more than a 5% loss on any position, ever.

    Maybe they don’t need to worship at the altar or anything, but some of these value guys could stand to add TA to their quiver.

  25. bdg123 commented on Jun 12

    “I served with Jack Kennedy. I knew Jack Kennedy. Jack Kennedy was a friend of mine. Senator, you are no Jack Kennedy.”

    Insert Lampert and Buffett for the same results.

    I’m familiar with the inner workings of one of his acquisitions by first hand experience. I’d be polite in saying it seems intuitively obvious he is personally responsible for its poor performance.

    And, needless to say Lampert has made huge mistakes on his investments over the last few years. Monkeys made money throwing darts in the 1990s. Now, we find out who really has the brass cajones.

  26. VennData commented on Jun 12

    He should buy Cindy McCain’s brewery, so she’s not accused of cavorting with Brazilians… or even worse, Belgians.

    Speaking of which, The Oracle’s got some BUD – I find the stuff undrinkable – but maybe, finally having the two biggest brewers with 75% total share-plus will get Congress to augment the ridiculous Depression-era alcohol distribution laws.

    Cindy McCain, another Republican who benefits from government-restricted markets.

  27. Groty commented on Jun 12

    CTX got shallacked 10% yesterday alone. I bought some for a long term account late in the day at $14.25.

    They were among the first to start taking writedowns, and have taken very extremely large charges every quarter since for two years. That makes me think they will be one of the first to finish the restructurings.

    It trades at 75% of book. It can still take some enormous writedowns to get to book value.

    It really boils down to liquidity and playing a game of chicken with the banks in terms of renegotiating terms or getting waivers for covenant violations if they get in trouble.

  28. Chester White commented on Jun 13

    “Recently, the Greenwich, Conn., hedge fund, which controls investments it valued at about $11.6 billion in its most recent government financial report, began picking up shares in hard-hit housing-related stocks….At recent prices, the stakes in the two home builders are valued at $10.4 million and $10.8 million, respectively.”

    WOW, a .2% commitment! What balls that man has! What an ice-in-the-veins plunger!

    Excuse me while I take a serious flyer by sinking $25 into Google stock.

    Gimme a friggin’ break.

  29. Sami commented on Jun 13

    tough crowd to impress.

    I guess being a billionaire and one of the best performance track records in investing is not enough to impress you guys.

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