Eddie Lampert is no Warren Buffett

Have you heard the comparison between Eddie Lampert and Warren Buffett. Well, let's take a look...

- Buffett doesn’t like retailers unless they have an economic moat - of which neither Sears nor Kmart has one (Buffett owns Wal-Mart, Target and his beloved Nebraska Furniture Mart - all of which have growing moats at the expense of Sears and Kmart).

- Unlike Lampert, Buffett doesn’t get directly involved in the management of his companies, he just allocates the capital they generate.

- I think Buffett would consider Sears/Kmart a “cigar butt” investment - trying to get one last puff before it goes out. While he does make those kind of investments, it is not his primary style.

- Lampert is generating cash by selling assets and intellectual property. Buffett never wants to sell assets and intellectual property - his holding period is forever.

- What is similar, is what Buffett would probably consider one of his failures. Lampert had a large investment before Kmart went into bankruptcy, and rather than seeing that investment go down the drain, he salvaged it by taking control and throwing more money at it. The best comparison to Buffett is the purchase of General Re, using additional capital to turn it around.

Eddie Lampert's Hedge Fund has a great track record with 29% annual returns. But, you can not compare Lampert (or any investor) to Buffett based on their returns alone, you have to compare them on style and their styles seem quite different.

If your hear of a manager that describes himself as a Buffett investor, let's talk.

1 comment:

Alex Garcia said...

thanks for the comment. I always appreciate others view and of course respect them. Lets remember that all value investors are not the same and no one is even close to Buffett. The only investor who even comes close to Buffett might be Charles Munger. Each value investor is different in many ways. Lampert concentrates heavily in ratail and has made a nice living doing so. Others diversify enormously and buy every bargain they can find, Walter Scholss(sp?) comes to mind. Happy New Year mate