Lampert Puts Money On Housing Rebound

Lampert Puts Money On Housing Rebound
Stakes Being Taken In Battered Builders, Lenders and Retailer
By GARY MCWILLIAMSJune 12, 2008
Billionaire hedge-fund manager Edward S. Lampert is placing new bets on a U.S. housing recovery, buying stakes in beaten-up home builders, mortgage lenders and a home-improvement retailer.
Mr. Lampert's ESL Investments Inc., which owns half of department-store giant Sears Holdings Corp. and 40% of car retailer AutoNation Inc., has previously focused with mixed success on retail and bank stocks.
Recently, the Greenwich, Conn., hedge fund, which controls investments it valued at about $11.6 billion in its most recent government financial report, began picking up shares in hard-hit housing-related stocks. ESL acquired small stakes in U.S. home builders Centex Corp. and KB Home, according to its latest Securities and Exchange Commission filings. At recent prices, the stakes in the two home builders are valued at $10.4 million and $10.8 million, respectively.
ESL also is tip-toeing into mortgage origination and servicing, acquiring about four million shares of CIT Group Inc., a struggling subprime home and commercial lender, as well as 1.4 million shares of PHH Corp., a mortgage originator and mortgage-service company. The shares are valued currently at about $35.5 million and $25.2 million, respectively. ESL spokesman Steve Lipin declined to comment on the investments.
Mr. Lampert's purchases come as some analysts think the housing market's decline may be nearing an end. Investment adviser Sanford C. Bernstein & Co. this week estimated the housing correction will "begin to bottom within the next several months, which should lead to declining inventories and, eventually, stabilizing prices."
In another bet on a housing turnaround, Mr. Lampert this spring increased his stake in home-improvement retailer Home Depot Inc. ESL holds about 22.7 million shares valued at $590 million, up from 16.7 million shares last year.
Earlier this decade, Mr. Lampert acquired car-parts retailer AutoZone Inc. and discount chain Kmart Corp., turning the two around for big gains. He has been less successful with a big investment in Citigroup Inc. that came before the full force of the subprime-loan debacle. His purchases of Home Depot also have looked premature. He acquired his initial shares last this past fall when the stock was trading at between $32 and $37 a share; shares currently trade around $26. Meanwhile, the total value of his equity portfolio has tumbled to about $10.04 billion from about $11.6 billion reported at the end of the first quarter.
ESL acquired its shares in mortgage company PHH in September and only recently disclosed the investment. ESL is one of a handful of companies that have permission from the SEC to temporarily delay releasing details of some investments.
The housing investments are true to Mr. Lampert's interest in out-of-favor companies and industries and reflect his propensity to acquire shares in companies that have seen their shares tumble after buyouts collapsed.