Chicago has a special relationship with billionaire hedge fund investor Edward Lampert due to his position as chairman of Sears Holdings Corp. Sears, Roebuck and Company, or Sears, as a good number of you may already know, is a chain of department stores that has its headquarters in the Chicago suburbs. As such, I wasn’t surprised when the Chicago Tribune’s Sandra Jones wrote a piece last week that dissected Mr. Lampert’s investments as of the end of last quarter. Jones wrote:

ESL Investments Inc., Lampert’s Greenwich, Conn.-based hedge fund, began buying shares in credit card issuer Capital One Financial last year. The fund held 9.9 million shares, valued at $504 million, as of Sept. 30, according to documents filed with the Securities and Exchange Commission late Friday. The fund also said it bought 34.6 million shares of mortgage giant Fannie Mae, valued at $52.9 million, in the quarter ended Sept. 30.

The U.S. government took control of the Federal National Mortgage Association, known as Fannie Mae, on Sept. 7, after a wave of mortgage defaults.

Additionally, Lampert’s fund bought 550,000 shares of Hartford Financial Group Inc., worth $22.5 million, and nearly doubled his stake in CIT Group Inc., to 7.3 million shares worth $51 million, in the quarter, the filing said.

Lampert owns 52 percent of Hoffman Estates-based Sears through ESL, making it his largest equity investment. He also holds large stakes in AutoNation Inc., AutoZone Inc. and Citigroup Inc.

Source:

“Lampert takes hit on Sears holdings”
Sandra M. Jones
Chicago Tribune, November 15, 2008

Taking advantage of depressed stock prices around the world, emerging markets veteran Mark Mobius has been busy acquiring global equities. Bloomberg’s Fabio Alves and Monica Bertran wrote on Monday:

Mark Mobius said he’s “aggressively” buying consumer stocks, including cellphone companies, retailers, banks and furniture makers, as faster economic growth in China, India, South Africa and Turkey offsets sagging demand from developed nations.

“We see a consumer boom in all of those countries,” Mobius, who oversaw more than $24 billion in emerging-market stocks on Sept. 30 as executive chairman at Templeton Asset Management Ltd., said in a Bloomberg Television interview from Johannesburg. “Per-capita income is growing at a very rapid pace in these countries.”

Mobius, who has more than 40 years of experience working with emerging markets, thinks that the slowdown in the global economy might be shorter than most people expect. From the Bloomberg piece:

The global economic downturn may not be as long or severe as expected because of the coordinated fiscal and monetary stimulus put forth by policy makers worldwide, the 72-year-old investor said today…

The slowdown “will be rather short-lived and, of course, the markets will anticipate this,” Singapore-based Mobius said. “There will be some deceleration, but these are still fast-growing countries.”

São Paulo Stock Exchange, Brazil

Dr. Mobius also likes the prospects of Brazil, which he believes offers a great opportunity for investors. From the Telegraph (UK) earlier today:

Brazil has a growing consumer base with personal wealth to spend. This stands to benefit Brazilian companies, particularly in the consumer sector. Brazilian exporters also contribute to growth. We also favour undervalued companies with high dividend paying stocks, net generators of cash and low leveraged companies. At the same time, companies with a strong market position and competitive advantages are also attractive.

We continue to maintain a positive outlook on Brazil and its enterprises. We believe the irrational panic that forced many funds to withdraw from Brazil and the stress of the local currency due to the global liquidity concerns, have depressed valuations of the companies to create an enormous opportunity for investment.

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Sources:

“Mobius Says He’s Buying China, India, South Africa (Update2)”
Fabio Alves, Monica Bertran
Bloomberg, November 17, 2008

“Emerging market guru Mark Mobius punts Brazil”
Telegraph (UK), November 19, 2008

Emerging markets veteran Mark Mobius doesn’t think the recent selloff in commodities is the end of a boom which started back in 1999. Pratima Desai for Reuters UK wrote last week:

“When you have a long-term uptrend, excesses build up along the way. We are witnessing a correction,” said Mark Mobius, executive chairman at Templeton Asset Management.

“Demand for commodities will remain at a high level in countries like China and India. If we see a serious worldwide recession, then we will see the end of the commodities boom.”

In fact, Dr. Mobius believes commodities may just be the global economy’s “saving grace.” Reuters Kevin Plumberg said on August 15:

Mark Mobius, executive chairman of Templeton Asset Management Ltd, said he believes consumer demand in emerging markets will ultimately be one of the factors keeping the global economy out of recession. Mobius is a value investor who has long touted the inherent strength of emerging markets.

“What we like are the consumer plays. As much as possible we are trying to get exposure to consumer-oriented sectors, whether that is consumer banking or retail,” he said in a phone interview from Turkey.

In addition to China, Mobius, who oversees some $40 billion in assets, likes the technology sectors in Taiwan, India and Korea. His firm has also cut down on its exposure to the commodities sector while increasing holdings in consumer-oriented sectors in South Africa and Turkey, where he said interest rate rises have brought share prices down to attractive levels.

Levent Financial District
Istanbul, Turkey

Sources:

“Commodity rout a blip”
Pratima Desai
Reuters (UK), August 15, 2008

“RPT-ANALYSIS China and co stand between world and ‘recession’”
Kevin Plumberg
Reuters, August 15, 2008

You may have heard by now that New York-based clothing retailer Steve & Barry’s filed for Chapter 11 bankruptcy protection yesterday. Now, the rumor is that billionaire investor and Sears Holding Corporation chairman Edward Lampert might be interested in acquiring the company. The Chicago Tribune’s Susan Chandler wrote this morning:

It made its name selling $10 pairs of athletic shoes and $8 dresses, but it turns out Steve & Barry’s wasn’t making a profit.

The fast-growing New York retailer sought Chapter 11 bankruptcy protection Wednesday, as rumors swirled that Sears Holdings Corp. might be interested in a bailout or picking up some of its brands.

A Sears spokesman declined to comment on any potential interest, and investors were clearly put off by the prospect. Sears’ shares lost almost 5 percent of their value Wednesday, falling $3.53, to $72.54 a share. But some retail experts said such an alliance could make sense for Sears Chairman Edward Lampert.

“Eddie Lampert’s apparel is in chaos. Eddie Lampert needs traffic. Eddie Lampert needs a big idea. If that’s what he needs, this is potentially a very big idea,” said Howard Davidowitz, chairman of New York retail consulting firm Davidowitz & Associates.

Photo by Roberto Tostes, stock.xchng

Lampert, sometimes called “The Next Warren Buffett,” is an old hand at picking up companies down on their luck. Chandler noted:

But Steve & Barry’s trip through bankruptcy reorganization may make the company particularly appealing to Sears’ Lampert. He picked up a bargain in the retail bankruptcy of Kmart, paying pennies on the dollar for the discount chain’s debt. He then reorganized the company, exited bankruptcy, took Kmart public again in 2003 and engineered the $12 billion takeover of Sears, Roebuck and Co. in 2005.

Source:

“Will Sears try on Steve & Barry?”
Susan Chandler
Chicago Tribune, July 10, 2008

According to recent regulatory filings, Eddie Lampert, billionaire investor and chairman of Sears Holdings Corporation, has been steadily increasing his stake in the largest U.S. auto dealership group and auto parts retailer. Reuters reported this past Tuesday that Lampert has increased his holdings of AutoNation, the biggest U.S. auto dealership group, to just under 39%. Lampert, who is the largest shareholder of AutoNation, disclosed the acquisition of an additional 145,600 shares on May 16 in filings with the U.S. Securities & Exchanges Commission.

The investor, who is often referred to as “The Next Warren Buffet,” has also been actively acquiring stock of AutoZone, the largest U.S. auto parts retailer. According to Reuters on May 20, Lampert has increased his stake in the Memphis, Tennessee-based company from around 31% to just over 36% recently.

Sources:

“Lampert ups stake in AutoNation to 39 pct”
Soyoung Kim
Reuters, May 20, 2008

“CORRECTED - UPDATE 1-AutoZone earnings rise, stock up”
Christopher Kaufman, Kevin Krolicki
Reuters, May 20, 2008

Marc Faber, labeled “Dr. Doom” by the press, told CNBC’s Squawk Box Europe that the credit crunch is far from over and is likely to spread to other sectors outside of housing. Faber, who is the editor and publisher of The Gloom Boom & Doom Report, told CNBC that:

I personally think we are just starting the credit crunch and that it will get much worse over time…

I think the economy really stinks and the next sector to really get hit hard in America and elsewhere is retailing. In other words, that the consumer, he has to allocate the larger and larger portion of his income for energy, for gasoline, and for food, and he has less money for discretionary items, and if you took out the inflation in America from retail sales, namely in food and energy, the real retail sales would be down significantly.

You can access the 2 minute 51 second CNBC segment here.

Source:

“Gloom & Doom Economist: Credit Crunch Will Spread”
CNBC, May 19, 2008