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Zenvestor Berkowitz and Savant Lampert – Fears for Sears?

March 31, 2013 | About:
Sally Jones

Sally Jones

49 followers
From the stratosphere of hedge fund heights, where investors are more like wizards, how do these extraordinary managers really see the future of Sears Holdings Corporation (SHLD)? How does a Guru grok the future of this classic American retailer that has reflected changes in the country and commerce since 1925? We can look for patterns and believers.

GuruFocus research shows a pattern that whenever Sears makeover genius and 10% owner Edward S. Lampert invests in his own brainchild, the stock price tends to go up: When he bought SHLD stock on Jan. 10, 2013 at the average price of $40.89, the price of the stock increased by 22.21% . When he bought 1,239,056 SHLD shares on March 4, 2013 at the average price of $44.36, the price increased by 12.65%. As a major shareholder and CEO of Sears, Lampert’s high confidence in his own creation seems to lead the share price, a thrilling example of the very heart of entrepreneurial zeal and risk. By the way, this pattern does not factor in his flailing Sears spin-off Orchard Supply Hardware (OSH); that one Lampert has been unloading. Read full Orchard Supply Hardware story here.

As for a fellow stakeholder in Sears Holdings who also believes, “the Zenvestor” Bruce Berkowitz Berkowitz of Fairholme Capital Management, holds a mega position. He described Sears to his shareholders in August 2012: “Sears Holdings (SHLD) (11% of the Fund) is one of the largest corporate real estate organizations in the world, with a portfolio of retail locations that is second to none. Generally Accepted Accounting Principles ("GAAP") mandate valuing their real estate at the lower of cost or market. GAAP would force the Dutch settlers to value Manhattan today at the 1626 purchase price of $23.70. The company's reported book value of $43 understates real values. Warrants received by the Fund from General Growth Properties (GGP) (7% of the Fund) during its reorganization provide the Fund the right to "cash-in" the difference between GGP's market price and the current strike price of $9.52 on now 45 million shares. For the next 22 quarters, distributions by GGP will further reduce this strike price and increase the number of shares.”

As of quarter ending Dec. 31, 2012, Berkowitz owns 18,146,573 shares of SHLD, valued as $751 million. In fact, his SHLD position accounts for 10.8% of his equity portfolio. Berkowitz added his positions in the Sept. 30, 2012 quarter by 0.62%, again in the Dec. 31, 2012 quarter by 7.16%.



Articles on GuruFocus.COM

Sears Holdings Corporation has a market cap of $5.32 billion; its shares are traded at around $49.97. The P/S ratio is 0.1.

Last month as Sears Holding Corporation (SHLD) announced a loss of $489 million with sales continuing a six-year decline, Sears CEO Edward Lampert, also manager of ESL Investments, was increasing his position.

ifLampert’s company ESL Investments has a portfolio of 11 stocks with a value of $3.8 billion and a quarter-over-quarter turnover of 8%. Lampert’s portfolio is heavily weighted in consumer cyclical at 94.6%.

Lampert’s company ESL Investments has a portfolio of 11 stocks with a value of $3.8 billion and a quarter-over-quarter turnover of 8%. Lampert’s portfolio is heavily weighted in consumer cyclical at 94.6%.

No one knows the future of Sears, but a quote from “Ignore the Crowd” Bruce Berkowitz could apply: “Always assume you will have bad luck.”

GuruFocus readers voted Bruce Berkowitz, founder and manager of the Fairholme Fund, as GuruFocus’ Guru of the Year for 2012.

Fortune called billionaire Edward Lampert “the best investor of his generation.” He started ESL Investments in 1988 at the age of 25 and earned a reputation for returns averaging 29% a year. On the Forbes list of 400 Richest Americans, Edward Lampert is 68th.

About the author:

Sally Jones
Sally Jones writes about Real Time Picks. She says, "I truly enjoy watching the Gurus in realtime and telling their story."

Rating: 3.7/5 (12 votes)

Comments

Nicolas73
Nicolas73 premium member - 1 year ago
Thank you Sally, please could you just change Lambert in Lampert?

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