The Search is On: Finding Bill Ackman's Next General Growth Properties (GGP)
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After the hedge fund kingpin teased the market in a recent letter to shareholders, speculation has been running rampant the past few days about what stock Bill Ackman of Pershing Square Capital will disclose as his new position.
According to an August 17th investor letter obtained by CNBC, Ackman "made asymmetric investments which are not for hedging purposes, but which also offer large payoffs on relatively modest commitments of capital where we similarly believe that the market has mispriced the probability of a positive outcome." Ackman said he will share the investment in greater detail in the upcoming months.
Ackman compared the new investment to his wildly profitable bet on mall owner General Growth Properties (NYSE: GGP). "It is both an attractive standalone investment and one that offers significant hedging benefits for our portfolio. For a modest amount of capital commitment, this investment offers the potential for extraordinary profits."
CNBC's Fast Money team discussed the mystery investment Wednesday evening. Some of the team believed Ackman could be buying deep out of the money calls, possibly on a banking stock. Another Fast Money contributor suggested Ackman's new investment could be a stock similar to General Growth, one that either just came out of bankruptcy or is on the cusp of going into bankruptcy. He can restructure, put his own people in and drive it higher. Yet another contributor said Greek banks could be another place Ackman could be looking.
Ackman-watcher Todd Sullivan of ValuePlays.net said he believes the hedge fund manager will unveil the new investment at the Value Investing Congress in October. He also believes the investment will be in retail.
The Staff at StreetInsider.com has closely followed Ackman for years and here are some of our thoughts:
One stock that immediately pops to mind is YRC Worldwide Inc. (Nasdaq: YRCW). The trucking company was near bankruptcy, is going through a major restructuring, and has a stock price below $1. The company has repeatedly said the stock could have little or no value, but trading in the stock may suggest otherwise. This may be a situation with so many moving parts, that the average investor wouldn't be able to wrap their head around it...enter Ackman. An investment the transportation sector would not be completely foreign to Ackman; he has owned shipping company Alexander & Baldwin (Nasdaq: ALEX) for some time.
While an investment in YRC Worldwide could be a possibility, Ackman has specialized in financial, real estate and retail and may likely stick to this genre for his latest investment.
Another thought is the mortgage-bond insurers. Ackman was short a number of these in the years during and before the financial crisis hit. No one in the market may know these stocks better than him. There is a remote chance Ackman could be changing his tune and finally seeing value here. Stocks in the mortgage-bond insuring sector include MBIA Inc. (NYSE: MBI), PMI Group Inc. (NYSE: PMI), Radian Group Inc. (NYSE: RDN), and MGIC Investment Corp. (NYSE: MTG).
Ackman said the new investment is an “attractive standalone investment and one that offers significant hedging benefits for our portfolio”. Hmmm... hedging benefits?
Let’s look at his current portfolio holdings:
Fortune Brands, Inc. (NYSE: FO), Target (NYSE: TGT), JCPenney (NYSE: JCP), General Growth Properties (NYSE: GGP), Kraft Foods (NYSE: KFT), Citigroup (NYSE: C), Family Dollar Stores (NYSE: FDO), Howard Hughes (NYSE: HHC), Alexander & Baldwin (Nasdaq: ALEX), and Greenlight Captial RE (Nasdaq: GLRE).
Ackman appears to have his portfolio positioned defensively toward the lower end of the consumer spectrum, with a few exceptions. So, one way to hedge this would be to buy something that will benefit if the still struggling middle-to-upper middle class turns around. Maybe an inspirational-retailers like The Talbots’s (NYSE: TLB) and or Bebe Stores (Nasdaq: BEBE), or teen retailers like American Eagle Outfitters (NYSE: AEO) or Aeropostale (NYSE: ARO). Other ideas are office supply stores like OffieMax (NYSE: OMX), OfficeDepot (NYSE: ODP) and drug store chain Rite Aid (NYSE: RAD).
Please comment below if you have an ideas of Ackman’s next great trade.
According to an August 17th investor letter obtained by CNBC, Ackman "made asymmetric investments which are not for hedging purposes, but which also offer large payoffs on relatively modest commitments of capital where we similarly believe that the market has mispriced the probability of a positive outcome." Ackman said he will share the investment in greater detail in the upcoming months.
Ackman compared the new investment to his wildly profitable bet on mall owner General Growth Properties (NYSE: GGP). "It is both an attractive standalone investment and one that offers significant hedging benefits for our portfolio. For a modest amount of capital commitment, this investment offers the potential for extraordinary profits."
CNBC's Fast Money team discussed the mystery investment Wednesday evening. Some of the team believed Ackman could be buying deep out of the money calls, possibly on a banking stock. Another Fast Money contributor suggested Ackman's new investment could be a stock similar to General Growth, one that either just came out of bankruptcy or is on the cusp of going into bankruptcy. He can restructure, put his own people in and drive it higher. Yet another contributor said Greek banks could be another place Ackman could be looking.
Ackman-watcher Todd Sullivan of ValuePlays.net said he believes the hedge fund manager will unveil the new investment at the Value Investing Congress in October. He also believes the investment will be in retail.
The Staff at StreetInsider.com has closely followed Ackman for years and here are some of our thoughts:
One stock that immediately pops to mind is YRC Worldwide Inc. (Nasdaq: YRCW). The trucking company was near bankruptcy, is going through a major restructuring, and has a stock price below $1. The company has repeatedly said the stock could have little or no value, but trading in the stock may suggest otherwise. This may be a situation with so many moving parts, that the average investor wouldn't be able to wrap their head around it...enter Ackman. An investment the transportation sector would not be completely foreign to Ackman; he has owned shipping company Alexander & Baldwin (Nasdaq: ALEX) for some time.
While an investment in YRC Worldwide could be a possibility, Ackman has specialized in financial, real estate and retail and may likely stick to this genre for his latest investment.
Another thought is the mortgage-bond insurers. Ackman was short a number of these in the years during and before the financial crisis hit. No one in the market may know these stocks better than him. There is a remote chance Ackman could be changing his tune and finally seeing value here. Stocks in the mortgage-bond insuring sector include MBIA Inc. (NYSE: MBI), PMI Group Inc. (NYSE: PMI), Radian Group Inc. (NYSE: RDN), and MGIC Investment Corp. (NYSE: MTG).
Ackman said the new investment is an “attractive standalone investment and one that offers significant hedging benefits for our portfolio”. Hmmm... hedging benefits?
Let’s look at his current portfolio holdings:
Fortune Brands, Inc. (NYSE: FO), Target (NYSE: TGT), JCPenney (NYSE: JCP), General Growth Properties (NYSE: GGP), Kraft Foods (NYSE: KFT), Citigroup (NYSE: C), Family Dollar Stores (NYSE: FDO), Howard Hughes (NYSE: HHC), Alexander & Baldwin (Nasdaq: ALEX), and Greenlight Captial RE (Nasdaq: GLRE).
Ackman appears to have his portfolio positioned defensively toward the lower end of the consumer spectrum, with a few exceptions. So, one way to hedge this would be to buy something that will benefit if the still struggling middle-to-upper middle class turns around. Maybe an inspirational-retailers like The Talbots’s (NYSE: TLB) and or Bebe Stores (Nasdaq: BEBE), or teen retailers like American Eagle Outfitters (NYSE: AEO) or Aeropostale (NYSE: ARO). Other ideas are office supply stores like OffieMax (NYSE: OMX), OfficeDepot (NYSE: ODP) and drug store chain Rite Aid (NYSE: RAD).
Please comment below if you have an ideas of Ackman’s next great trade.
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