Billionaire Edward Lampert’s Failed Transformation of Sears and His Top Stock Picks for Q4

#3 Lands’ End Inc. (NASDAQ:LE)

 – Shares Owned by ESL Investments (as of September 30): 6.72 Million

 – Value of Holding (as of September 30): $181.56 Million

Edward Lampert’s hedge fund cut its position in Lands’ End Inc. (NASDAQ:LE) by 929,813 shares during the three-month period that ended September 30. In April 2014, the same Sears Holdings completed its spin-off of Lands’ End, which has been operating as an independent company involved in the multi-channel retailing business ever since. On September 3, the company posted second quarter net revenue of $312.4 million, which was down by 10.0% year-over-year. At the same time, its net income decreased to $7.5 million from $11.8 million. The shares of Lands’ End are down by 58% this year, but are currently trading at a cheap trailing P/E ratio of 11.86. Hedge fund D.E. Shaw & Co. L.P., founded by David E. Shaw, kept its stake in Lands’ End Inc. (NASDAQ:LE) unchanged during the third quarter at 325,000 shares.

#2 AutoNation Inc. (NYSE:AN)

 – Shares Owned by ESL Investments (as of September 30): 6.79 Million

 – Value of Holding (as of September 30): $395.12 Million

ESL Investments reduced its exposure to AutoNation Inc. (NYSE:AN) by 429,180 shares during the third quarter, ending the three-month period with 6.79 million shares. The automotive retailer has seen immense growth over the past several years, with its shares advancing by more than 143% over the past five-year period. This year has not been bad either in terms of stock performance, as the stock has advanced by over 5% year-to-date. Even so, shares are still trading cheaply if considering its trailing P/E ratio of 15.50. Earlier this month, the company reported October retail sales of 28,247 new vehicles, which marked an increase of 14% year-over-year. Glenview Capital holds a 1.75 million-share stake in AutoNation Inc. (NYSE:AN) as of September 30.

#1 Sears Holdings Corp (NASDAQ:SHLD)

 – Shares Owned by ESL Investments (as of September 30): 22.35 Million

 – Value of Holding (as of September 30): $505.04 Million

Expectedly, Sears Holdings Corp (NASDAQ:SHLD) represents the largest holding in Edward Lampert’s equity portfolio as of the end of the September quarter. Nevertheless, ESL Investments decreased its holding in the retailer by 3.09 million shares during the three-month period. It appears that the billionaire hedge fund manager has failed to turn around the struggling retailer since he became CEO back in 2013. Sears Holdings has completed numerous spin-offs, some of which we mentioned above, and keeps following the same strategy in an attempt to unlock shareholder value. Edward Lampert believes that Sears Holdings can achieve its much-needed turnaround, stating that “by raising such substantial capital in 2014 and 2015, we’ll now be able to accelerate our company’s transformation”. Meanwhile, the shares of Sears Holdings have plummeted by another 33% since the beginning of the year. Debra Fine’s Fine Capital Partners was bullish on Sears Holdings Corp (NASDAQ:SHLD) and the work Lampert is doing, holding a stake of 1.82 million shares as of the end of September.

Disclosure: None