Following the Big Guys

The Other Lampert Play: Auto Zone
If uncertainty has no place in your portfolio, the Sears Holding Group won’t fit your selective tastes. SHLD is the popular way to play off the genius of Eddie Lampert. His hedge fund consists of 72% SHLD. That’s a huge bet on Sears but the company isn’t anywhere near “Best of Breed”. The truth is Sears consists of a failing big-box retailer (K-Mart) with thin margins and another retailer tied heavily to housing (Sears).

The other option is investing with a different position that ESL Investments holds. AZO is the firms second largest position (19.5%) and the company has better profit margins than Sears (9.7% vs. 2.9%). These margins mean there is more relative cash to do what ESL does best: regular and huge buybacks. These buybacks are Lampert’s biggest tool in creating shareholder value. AZO has reduced its shares outstanding by 43% over the past 10 years. ESL Investments controls a 33% stake of Auto Zone and that should give an individual investor the faith to follow Lampert on another great long term buy.


In the Media
If you’re a fan of buybacks, Jim Cramer recently brought up Cracker Barrel (CBRL). Over the past ten years, shares out has reduce 61%. More importantly, it has reduced by 51% over the past two years.

On the subject of famous investors; Marty Whitman is interviewed in the most recent issue of Fortune. His Third Avenue Value Fund (TAVFX) has returned 22.5% over the past five year annualized. The most interesting thing is his turnover rate: 10%. That means he hold a stock on average for 10 years! That’s long term investing.

His three picks: BAM, RDN, FCE.A

Brookfield Asset Management is a great buy and forget stock that we want to look at more deeply. They hold global, illiquid assets including real estate, timber, power plants, and infrastructure; all great long term places to be.