Thinking Like Lampert

In mid May I wrote a post about selling my Citigroup shares to Sears Holdings (SHLD) Chairman and ESL leader Eddie Lampert.

In it I lamented the fact that I was thinking along the same lines as Lampert but did not stick to my guns and bailed on Citi (C) shares at the same time Lampert was buying them. I vowed not to make the same mistake again and re-entered my Citi position. This turned out to be a great test as recent events (has anyone heard anything about a credit market issue?) have caused my Citi position to drop from $54 to todays $45 (Lampert's original entry price was estimated to be around $54 a share). Rather than cutting my losses last week (August 9th) I picked up more shares at $47.57 in part of my vow not to make the same mistake twice and I do not mind getting paid a 4.6% and growing dividend to wait. At the same time I picked up more Sears Holdings shares some 30% off it's high from earlier this year at $130 and change.

I took a large amount of satisfaction in the news that Lampert boosted his stake in Citigroup by 63 percent during Q2. In a SEC filing, ESL Investments held 24.8 million Citigroup shares at the end Q2, up from 15.2 million shares during the first quarter. Compound this with the news of the additional $1.5 billion Sears share buyback plan announced Monday and it has been a very good couple weeks for my investment reasoning.

Since ESL was founded in 1988, Lampert has lost money only twice, in 1990 and 2002 (he followed the 2002 losses with 45% and 54% returns in 2003 and 2004) and has treated clients to annualized returns of 24%.

Based on his history, Lampert will not make any public proclamations about the job Citi CEO Chuck Prince is doing and whether or not he should keep it. He works behind the scenes and this is probably part of the reason he is almost always able to get the changes he wants enacted with little push back from management.

Time will tell how this works out I am very optimistic that based on his track record and my thinking along the same lines recently (after a very irritating lesson earlier in the year) that these investment will turn out very well indeed.