Barnes & Noble Shares Climb 18% After Jana Partners Buy In

Barnes & Noble’s (BKS) share prices gained more than 18% last Monday after hedge fund Jana Partners bought a 12% stake in the company.

Barry Rosenstein JANA PARTNERS

Jana Partners LLC, managed by Barry Rosenstein, disclosed late Friday that it bought almost seven million shares of Barnes & Noble, plus an option to buy an additional 250,000 shares at $13. Barnes & Noble’s stock price had been languishing in the $10 to $20 range for the past year, and closed at $13.03 in yesterday’s trading.

Jana Partners’ Barry Rosenstein believes in betting on the management teams of the companies he buys. He was also likes to invest in companies with strong cash flows. This philosophy seems to be working because as of October 2011, Jana Partners returned an amazing 200% since it started operations

Jana’s recent buy-in may seem promising for Barnes & Noble, which (by the way) incurred losses of more than $73 million last year. In contrast, its rival Amazon.com (AMZN), made a $631 million profit during the same period. Both companies sell books, e-books, e-readers, and other merchandise online, but Amazon.com trumps Barnes & Noble in terms of revenue, brands, and maybe even strategy. The New York Times reported that “the company (Barnes & Noble) has said it is turning itself around, in particular by investing heavily in its Nook e-book division, though the plan remains risky”. Although the company reported record sales for its nook e-reader, it is still unclear if they will be able to turn that into a profit. It is also unclear if the company will follow Amazon.com’s profitable strategy of selling content via streaming from the cloud.

So does this mean that Barnes & Noble is a buy? I would say not yet. Let Jana do what it plans to do with BKS and wait for the company to turn a profit. As of now, Jana’s plans as an investor in Barnes & Noble remain unclear, so I wouldn’t take a position in BKS right now. For all we know, Jana could lobby the shareholders to spin-off divisions just like what it did with Mcgraw Hill (MHP) last year. News of Barnes & Noble’s potential Nook spinoff is already out, and this could be a potential play for Jana. However, I must caution investors that these are all still just speculations.

On the other hand, investors that are really craving for a piece of Jana’s play in BKS can use a safer approach to speculation, and that is to buy long-term call options on BKS. These contracts are relatively “cheap” and and can be held for two to three years going forward, which is probably enough time for BKS to make a turnaround.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!