Edward Lampert (Trades, Portfolio), founder of RBS Partners, has revealed his fund’s portfolio for the third quarter of 2021. The fund’s two trades include selling out of a position in Seritage Growth Properties (SRG, Financial) and a reduction in its AutoNation Inc. (AN, Financial) position.
Like Warren Buffett (Trades, Portfolio), Lampert targets mature and easily understandable businesses that have strong cash flows, but focuses less on management teams that can be changed in the future. Lampert seeks companies that can generate large amounts of cash throughout their lifetime and has significant experience investing in the retail arena.
Portfolio overview
At the end of the quarter, the fund’s portfolio contained two stocks with no new holdings. It was valued at $155 million and has seen a turnover rate of 0%. The two holdings in the portfolio are AutoNation and Lands’ End Inc. (LE, Financial).
The portfolio is entirely focused in the consumer cyclical sector.
Seritage Growth Properties
Lampert sold out of his Seritage Growth Properties (SRG, Financial) holding after it was reinstated in the second quarter of this year. The 473,669 shares were sold throughout the quarter at an average price of $15.79. Overall, the sale had a -4.75% impact on the equity portfolio and GuruFocus estimates the total loss of the holding at 22.76%.
Seritage Growth Properties is a U.S.-based fully-integrated, self-administered and self-managed real estate investment trust engaged in the real estate property business through its investment in its operating partnership, Seritage Growth Properties L.P. Seritage is principally engaged in the acquisition, ownership, development, redevelopment, management and leasing of diversified retail real estate throughout the United States. The company's primary objective is to create value for its shareholders through the re-leasing and redevelopment of the majority of its wholly-owned properties and JV properties. It generates a majority of its revenue from tenants.
On Dec. 6, the stock was trading at $14.55 per share with a market cap of $640.95 million. According to the GF Value Line, the stock is trading at a modestly undervalued rating.
GuruFocus gives the company a financial strength rating of 2 out of 10 and a profitability rank of 1 out of 10. There are four severe warning signs issued for a low Piotroski F-Score, declining revenue per share, poor financial strength and an Altman Z-Score placing the company in the distress column. The company’s cash-to-debt ratio of 0.1 ranks better than 60.16 of industry competitors.
Other top guru shareholders in Seritage Growth Properties (SRG, Financial) include Mohnish Pabrai (Trades, Portfolio), Hotchkis & Wiley, Third Avenue Management (Trades, Portfolio), Mario Gabelli (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio).
AutoNation
The guru’s fund also cut back its AutoNation (AN, Financial) position with the sale of 86,734 shares. The sale cut the holding by 8.96% and the shares traded at an average price of $112.61 during the quarter. GuruFocus estimates the total gain of the holding at a solid 284.03% and the sale had a -4.48% impact on the equity portfolio overall.
AutoNation is the largest automotive dealer in the United States, with 2020 revenue of $20.4 billion and over 230 dealerships and over 300 locations, including collision centers. The company also has eight AutoNation U.S. used-vehicle stores, four auction sites and over 50 collision centers all across 16 states primarily in Sunbelt metropolitan areas. New-vehicle sales account for about 51% of revenue; the company also sells used vehicles, parts and repair services as well as auto financing. The company (formerly Republic Industries) spun off its waste management unit (Republic Services) in 1999 and its car rental businesses (ANC Rental) in 2000.
As of Dec. 6, the stock was trading at $124.95 per share with a market cap of $8.20 billion. The GF Value Line shows the stock trading at a significantly overvalued rating.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 7 out of 10 and a valuation rank of 6 out of 10. There are currently no severe warning signs issued for the company, but a medium warning sign indicates insiders have been selling shares. The company saw a big spike in free cash flow in 2020, but its consistent net income took a hit.
AutoNation (AN, Financial) shares are also owned by Mario Gabelli (Trades, Portfolio), Murray Stahl (Trades, Portfolio), Pioneer Investments, Steven Cohen (Trades, Portfolio) and Ray Dalio (Trades, Portfolio).
