Three Amigo’s Off Target, Attempt To Salvage 2008 With Marketing Blitz

We are approaching the "silly season" on Wall Street; the final two months of the year are often the salvation of the BuySide as they attempt to pull a rabbit out of their hat and get paid for their hard work whipsawing each other around.

Of course, this year has defied convention, and history. But that won't stop the few money managers that are left standing from going on offense. It is showtime, which means, for better or worse, Wall Street's Three Amigos will be in our face until the eggnog runs dry....

Pershing Square Capital Management LP, the hedge fund run by William Ackman, will give details tomorrow about a potential transaction involving Target Corp., sending the retailer up 10 percent in (early) New York trading.

Pershing, which controls almost 10 percent of Target's stock, will discuss a deal that ``will be of particular interest to investors and analysts focused on retail, real estate, fixed income and credit,'' according to a statement today. Bloomberg

Last we knew Mssrs Einhorn and Ackman were having a tough go of things; hopefully they were not still involved in the Volkswagen/Porsche pair trade that has reduced hedge fund managers to tears. But the Amigos have each others back. Whitney Tilson, whose Focus Fund (TILFX) has a broad mandate, allowing it to short stocks and hedge, is down high 30%'s YTD and natch, pitching in on the jawboning to rally the shares of Target Corp. (TGT-NYSE):

For more adventurous investors looking to buy great companies in the most out-of-favour sectors such as financials and retailers, I recommend American Express and Target. Both stocks are down 50-60 per cent over the past year and trade near 11-year and five-year lows, respectively.

Amex, which recently reported better-than-expected earnings, will no doubt suffer significant losses in its credit card business and will be hurt by weak consumer spending for some time, but one does not often have the chance to buy one of the world’s great businesses with excellent long-term growth opportunities at less than 10 times earnings.

Target is a similarly superior business facing significant macro headwinds, which have crushed the stock to below 10 times this year’s earnings estimates (which the company recently reaffirmed). In September, Target’s same-store sales were down 3 per cent, yet total sales were up 2.5 per cent, a respectable showing given the environment.

Target remains healthily profitable and is taking advantage of its weak share price to buy back stock –4 per cent of its outstanding shares per quarter over the past three quarters – which is exactly what we as investors would hope to see. Financial Times

I have to admit I am on the same page as Tilson, although my friends are lower maintenance and a bit lower profile than his. Too, I tend to shy away from name dropping, and have never been able to cram in as many marquee names into a piece as him.

Warren Buffett, Bill Ackman, Seth Klarman, Ian Cumming, Joe Steinberg and Nelson Peltz all make cameo appearance in Tilson’s FT piece, which puts you inside his head and updates you on the mutual admiration society that is dominating Value Land at the moment. Notice no mention of Bill Miller...tsk tsk Bill was up 11.40% today to the Focus Funds rather anemic 415 basis point gain.

At this rate Whitney won’t make it back to break even until the Dow hits 20,000. Sure he makes a case for buying, but clearly is not looking for a moonshot by any means.

Still if you have an appetite for stock Whitney can walk you through his favorites, which include Berkshire Hathaway, McDonald’s, Wal-Mart, Coca-Cola, Amex, Target, Crosstex Energy, Atlas Pipeline Partners, Leucadia National and EchoStar Corporation.

I am generally on the same page with him, although not all of these stocks excite me.

And I have to ask, where is the beef in Wendy’s Arby’s Group (WEN-NYSE)?  True, the stock rallied sharply after posting another 52-week low today. But it has left shareholders queasy, which is how I feel sometimes after catching the Amigos on CNBC.

Do what you must guys, but please hold the cheese.

And until the Amigos hit their high water marks they will likely remain in our face.

Not everything they touch turns to gold, apparently.
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TGT two-year

The Amigos claim to be value investors, but Ackman chased Target and top ticked the stock in 2007. He doubled down, and then some, got his buddies involved and now management has to put up with his genius ideas for financial engineering. Please humor him, Minneapolis.
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Pershing Square to Discuss Potential Deal for Target
Bloomberg

Time to begin the bargain hunt
FT

Previously...

Einhorn, Ackman and Tilson: Wall Street’s Three Amigos
1440 Wall Street

Ackman Takes Dead Aim at Target
1440 Wall Street

Pershing Square Doubles Down on Stock of Target Corporation
1440 Wall Street
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The content contained in this blog represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No Positions

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