Bloomberg is reporting today that Bill Ackman is adding to his position in Target Corporation (TGT-NYSE). While long bets might not pay off immediately, buying the stock now certainly makes more sense than it did a year ago, when Ackman raised a new vehicle to invest in the company’s stock.
Since when do value managers buy stocks printing 52-week highs? It certainly did not work:
William Ackman put more cash into the $2 billion hedge fund he started to invest in Target Corp. as shares of the second-largest U.S. discount retailer declined 38 percent in the past year, according to two people with knowledge of the matter.
Pershing Square Capital Management LP, Ackman’s New York- based firm, added at least $100 million to the fund, while he personally committed $5 million. Ackman also solicited money from current and new investors, said the people, who declined to be identified because the fund is private.
The Target fund’s loss may exceed the drop in the Minneapolis-based company’s stock because it uses derivatives, which can amplify gains and losses. Target peaked at a record $70.14 on July 13, 2007, three days before Ackman disclosed owning a stake. Earnings have fallen for three straight quarters as consumers cut back on purchases of clothing and home goods. Bloomberg
A little over a year ago Ackman raised $2 billion dollars to invest in a single stock; he was looking to unlock hidden value in real estate. The rumor mill had him looking at Anheuser-Busch at the time, Ackman missed that one, however:
June 2007
The phrase “unlocking value” is often used in evaluating portfolios of real estate holdings, and was taken to mean that the company Ackman has in mind has a division with extensive real estate holdings. “Unlocking value” was also a key aspect of Ackman’s occasionally heated engagement with McDonald’s.
Other names a potential investor mentioned as possibly meeting those criteria were Starwood, Marriott, and Anheuser-Busch, maker of Budweiser beer. Bloomberg
The latest Bloomberg article is a bit confusing; it sounds like Ackman’s “single stock” fund has gotten beat up more than the decline in Target’s stock would imply given he levered up the position.
But Ackman’s diversified strategy is doing just fine year-to-date, and is roughly flat on the year after gaining 22% last year.
Armchair critics who have been mocking hedge funds for puny returns are probably out of line. Being flat YTD might make for boring cocktail chatter in the Hamptons this summer, but is perfectly acceptable given the carnage.
Ackman’s high profile short bets have worked out better than many of his longs. Ackman’s patience might eventually be rewarded here; the lockup provisions should buy him some time, in any case.
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Piggybacking Ackman on Target has become more appealing
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Ackman Adds Cash to Target Hedge Fund as Stock Slides
Bloomberg
June 2007
Ackman on the Prowl
1440 Wall Street
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Bill Ackman is a snot nosed self-promoting braggart who makes Donald Trump seem introverted. Remind me, what happened to Gotham Partners? I guess if I could bury my stupidity and start a new portfolio every few years, I could manage a zero return too. If it takes spectacular short sale gains to end even on the year, something is wrong with your strategy.
The question I have, is why are you “in the tank” for him?
I am not sure what you mean by “in the tank” but if you think I am pro-Ackman you are nuts.
My last post on twitter an hour ago was “ackmans GSE shorts turn red on his P&L;”
i poke fun at his tv appearances, make fund of the three amigos (tilson, eihorn) when appropriate, have called him the “worst long picker” on the street too.
he has been ok with some stuff, but get plenty wrong. Did you see me ripping him for Borders group.
I disagree with you on Howard Lindzon, but agree with you now.
Unfortunately you picked one post...go read the archives on Ackman.
All the value blogs kiss his ass and call him a genius...that does not happen here.
Being flat YTD is fine in my book, and I like TGT more now than 30 points higher.
I try to be balanced, but who else was calling the cult of value on the carpet months ago?
Me, took some shit for it, but look at those June numbers. Tilson has been godawful in his mutual funds.
I am well aware of Gotham being a shitshow, would have discussed if it was not dead and buried.
What else you got? You are ripping me for agreeing with you, take a deep breath,w e are on same page here.
SJ
mr. mccoy, sj is no ackman fan. haven’t you read his three amigos’ stuff?
on tgt, maybe it’s a bargain at these prices, maybe not. i think ackman’s got cost(co) envy myself.
hey, it sucks to pick the wrong retailer!
Target is working...your move Sherman.
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