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Billionaire Edward Lampert Adds New Retailer to Equity Portfolio

ESL Investments is a value-focused hedge fund manager founded by Edward S. Lampert in 1988. The investment firm manages several hedge funds, including RBS Partners, for high-net-worth individuals. Lampert had worked alongside reputable investor Daniel S. Och in the risk arbitrage department at Goldman Sachs before launching his own shop. ESL Investments defines itself as an aggressive conservative hedge fund and generally amasses substantial stakes in a few highly-researched companies. Sears Holdings Corporation (NASDAQ:SHLDrepresents ESL’s largest holding and Mr. Lampert acts as the company’s CEO. On the second spot is Lands’ End Inc. (NASDAQ:LE), which was spun-off from Sears last year. In addition, ESL also disclosed a new position in The Gap Inc. (NYSE:GPS). 


We don’t just track the latest moves of hedge funds. We are, in fact, more interested in their 13F filings, which we use to determine the top 15 small-cap stocks held by the funds we track. We gather and share this information based on 16 years of research which showed that these 15 most popular small-cap picks have a great potential to outperform the market, beating the S&P 500 Total Return Index by nearly one percentage point per month in backtests, and easily beating the most popular large-cap picks of funds, which nonetheless get the majority of their collective capital. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic only the very best ideas of the best fund managers on your own? Since the beginning of forward testing in August 2012, the Insider Monkey small-cap strategy has outperformed the market every year, returning 123%, nearly 2.2 times greater returns than the S&P 500 during the same period (see more details).

Edward Lampert
Edward Lampert
ESL Investments

We’ll now begin by discussing Edward Lampert’s most valuable holding, represented by Sears Holdings Corporation (NASDAQ:SHLD). ESL Investments owns 25.44 million shares of Sears as of the end of the second quarter, down by 1 million shares since the end of the previous quarter. The investment firm took control of Sears Roebuck & Company back in 2005, by merging it with Kmart, a company that was acquired out of bankruptcy by Edward Lampert. Lampert has also been the CEO of the company since January 2013, but has failed to find a solution to turn Sears around. The revenues generated by the retailer have been constantly declining, and the company has not posted a profit since 2010. Over the last year, Sears Holdings Corporation spun-off its Lands’ End subsidiary, sold the majority of its stake in Sears Canada, and made other moves that eventually increased the company’s liquidity, but failed to spur growth within its business. The other shareholders of Sears are surely disappointed with Lampert’s strategy, as the stock lost almost 27% year-to-date. Bruce Berkowitz’s Fairholme Capital Management is the largest shareholder of Sears Holdings Corporation (NASDAQ:SHLD), holding a 26.63 million shares as of the end of June.

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