Eddie Lampert Likes AutoZone

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WITH AUTOZONE ON THE REBOUND, Edward Lampert -- its biggest shareholder -- spent $94 million to top off his stake in the auto-parts retailer.

On Tuesday Lampert, well-known hedge-fund manager and chairman of Sears Holdings, disclosed that he now owns 22.9 million shares, or a 36.2% stake in the Memphis, Tenn.-based company. The billionaire investor purchased 807,442 shares from April 8 through April 15 for $94 million, an average of $116.04 a share. Lampert last reported owning 22 million shares, or a 31% stake in AutoZone, at the end of the fourth quarter.

The purchases were made indirectly through Lampert's investment vehicle ESL Investments and other subsidiaries. They were reported to the Securities and Exchange Commission in a 13D filing for active shareholders, although the documents said that the shares were obtained for investment purposes.

Neither Greenwich, Conn.-based ESL Investments nor AutoZone returned phone calls seeking comment on the purchases.

"In the end the most impressive thing about these transactions is that they're adding onto a large position which ESL has smartly kept for years now," says Jonathan Moreland, adviser to Ladenburg Thalmann Asset Management on insider strategies.

"This has been a huge home run for Lampert, who held onto the accumulation that he undertook when the stock was trading in the mid-$20s in 2001," he says. "And for him to be topping up his investment -- and despite the large dollar value, for him it really is just topping up -- makes it more impressive."

AutoZone shares dipped to a 52-week intraday low of $103.07 on Jan. 22. The stock has since recovered, gaining $1.13 to $122.49 on Friday.

AutoZone lost 8% in the last 12 months, while peers tracked by the Dow Jones Specialty Retail Index fell 18.5%. However, their fortunes diverged since the beginning of the year, with AutoZone rising 1.2% and the Index falling 6.3%.

"Any stock that is [exposed] to consumers paring back has traded down," says Moreland. "Obviously Lampert has a very long-term view, and the stock is in a long term uptrend. The market is acting as if we're closer to the end of the turmoil and stocks that were beaten down by that issue are starting to trade up. No one can say we're absolutely out of the woods, but the smarter money is leaning long and AutoZone is a perfectly decent insider-generated candidate for investors looking to play the longer term bet that the turmoil is over."

The Street may not be as sanguine as Lampert. Analysts polled by Thomson Financial on average rate the stock at Hold or the equivalent, with a 12-month target price of $130.20.

AutoZone currently has a Thomson Insider Rating of 7 (on a 10-point scale, with 10 being the most bullish), as compared with the Retail Goods industry average of 5.

Joshua Hong, director of research for OwnershipAnalyzer.com, wrote in an email to Barron's Online that while Lampert's purchase was positive, other institutional ownership data was neutral.