In its latest filings with the Securities and Exchange Commission, Ken Griffin‘s Citadel Investment Group disclosed reducing its stake in Seritage Growth Properties (NYSE:SRG), a Real Estate Investment Trust that was spun-off from Sears Holdings Corp (NASDAQ:SHLD) earlier this month. In this way, the investor, which initially reported ownership of 3.84 million shares, representing 7.2% of the outstanding class A common stock, disclosed holding 2.39 million shares, representing 9.7% of the stock. The new percentage of the class was calculated based upon some 24.58 million shares as of July 10.
Seritage Growth Properties (NYSE:SRG) has acquired 235 Sears and Kmart-branded stores from Sears, which also sold to Seritage 50% interests in joint ventures with Simon Property Group, General Growth Properties and The Macerich Company, which own together an additional 31 properties of Sears. The total proceeds from the transactions amounted to $2.7 billion and will allow Sears to enhance its financial situation and allow it to accelerate investments required for a transformation of the company into an asset light member-centric integrated retailer, Sears said in a statement. The stock of Seritage began trading on the New York Stock Exchange on July 6 and has gained around 7% since then.
Aside from Citadel, another investor that disclosed shares of Seritage Growth Properties (NYSE:SRG) is Eddie Lampert’s ESL Investments, which owns 2.56 million class A shares, including around 1.60 million class B non-economic voting shares. Bruce Berkowitz’s Fairholme also reported holding 3.25 million shares. ESL Investments is the largest shareholder of Sears Holdings Corp (NASDAQ:SHLD), with Eddie Lampert serving as the company’s Chairman and CEO, while Fairholme is the second-largest shareholder. ESL and Fairholme held 26.44 million shares and 26.0 million shares of Sears at the end of March respectively.
Citadel holds a small amount of Sears Holdings Corp (NASDAQ:SHLD) shares as of the end of March and also disclosed owning ‘Put’ and ‘Call’ options underlying shares of the company. Moreover, its latest 13F filings also show that Citadel hasn’t been bullish on Sears, holding small amounts of shares that were hedged with options. The investor is also not very fond of REITs, as can be seen from its 13F filings, which is why its move into Seritage Growth Properties (NYSE:SRG) is particularly interesting.
We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular stock picks in real time since the end of August 2012. These stocks have returned 135% since then and outperformed the S&P 500 Index by around 80 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
With this in mind, let’s take a closer look at Citadel. Ken Griffin founded his fund in 1990 with around $4 million in assets under management and over the years has grown it to more than $89 billion in equity portfolio. Citadel operates to main funds: Kensington and Wellington, which had an impressive performance, returning 25% in 2012 and 19.4% in 2013. It’s latest 13F filing disclosed largest holdings in terms of value as ‘Put’ and ‘Call’ positions underlying shares of Priceline Group Inc (NASDAQ:PCLN) and Apple Inc. (NASDAQ:AAPL).