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Lampert's Bet on CIT Group and Housing

Posted by: Ben Steverman on July 1, 2008

An update to my post on CIT Group below: Thanks to the Bespoke Investment Group blog, I learn that Edward Lampert — who some have hoped would be his generation’s Warren Buffett — is a big holder of CIT Group’s stock (CIT) through his firm ESL Investments. However, Lampert seems to have paid $9.48 for his CIT shares. That means he’s still losing money on CIT, which jumped almost 30% and closed at 8.83 on Tuesday, unless he’s picked up more stock in the meantime.

A broader point: Take a look at the bets that Lampert made on a housing recovery. Nearly every one of his investments — which include Home Depot (HD), Citigroup (C), SLM Corp. (SLM) and KB Home (KBH) — is below Lampert’s buying price.

CIT Group shares spiked Tuesday on hopes the firm can extricate itself from the housing mess. But the other stocks in Lampert’s portfolio don’t have that option.

A BusinessWeek magazine cover story this week is called “The Home Price Abyss: Why the Threat of a Free Fall is Growing.” Still, there are optimists out there. By not following the herd, Lampert and others are playing with fire. But the slow-motion nature of the housing crisis means it could be a while before they are proven right or wrong.

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Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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