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Lampert's ESL Up More Than 60 Percent

Eddie Lampert's ESL Partners is up more than 60 percent year-to-date before fees.

Eddie Lampert’s ESL Partners is very quietly enjoying a blockbuster year. Institutional Investor estimates the fund is conservatively up more than 60 percent year-to-date before fees.

The performance is based on II’s analysis of Lampert’s 12 holdings in his $5.7 billion equity portfolio.

For one thing, most of the stocks are racking up double-digit gains so far this year, including two stocks that comprise nearly 75 percent of the portfolio.

They are led by the controversial, embattled retailer Sears Holdings, whose stock has nearly doubled to $58.81 from a year-end close of $31.78. Sears accounted for about $2.6 billion of the portfolio at the end of June.

Shares of AutoNation, which accounted for $1.7 billion of the assets, hit an all-time high Friday of $43.75 and are now up nearly 20 percent for the year. The auto dealer giant got a boost Friday when Bank of America Merrill Lynch boosted its rating to Buy from Neutral.

Sears has taken a number of people by surprise, including Credit Suisse Securities, which has a $20 price target on the stock. In fact, earlier this month it was removed from the S&P 500 index.

Meanwhile, its most recent quarter was not exactly encouraging. Sure, it narrowed losses, posting an $0.86 per share loss versus $1.18 the prior year thanks to effective inventory management and expense reductions, according to S&P Capital IQ, but Sears Domestic same-store sales were down 2.9 percent and Kmart same store sales were off by 4.7 percent.

Sears, though, is finally starting to restructure and jettison some assets.

In April Sears sold 11 Sears Domestic stores to General Growth Properties for $270 million and gave up the leases on three Sears Canada properties to Cadillac Fairview Corp. for C$170 million ($171 million), S&P points out in a recent report.

The retailer also closed 82 underperforming Kmart and Sears Domestic stores in the first half of fiscal 2013.

The analyst also notes that the company announced plans to spin off its Sears Hometown and Sears Outlet businesses, as well as certain hardware stores, through a proposed rights offering that is expected to raise $400 million to $500 million in the second half of fiscal 2013. It also plans to reduce its stake in Sears Canada to a 51 percent controlling interest through distribution of Sears Canada common shares to SHLD shareholders during the 2012 calendar year.

Meanwhile, ESL’s stake in Gap — currently its third-largest holding with roughly 30 million shares on average this year — has doubled since year-end. 

Shares of AutoZone, which is currently a modest position for Lampert with 731,000 shares, is up about 15 percent so far this year.

And Capital One Financial, whose stake is slightly smaller than that of AutoZone, is up about 35 percent this year.

Add it all up and Lampert’s U.S. equity portfolio is up well over 60 percent gross this year.

Of course he could have a fair amount of cash generating very little income. Or he could have losing positions in debt or foreign securities. There is no way of knowing, but it is doubtful.

The firm would not comment.

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