Bill Ackman’s Activist Investment Secrets: JC Penney

JC Penney announced that Pershing Square’s William A. Ackman and Vornado Realty Trust’s Steven Roth are named to be on JC Penney’s board, and they’re expected to be elected on February 22nd, 2011. What happened after Bill Ackman’s and Vornado’s October 8th disclosure wasn’t very interesting. If you had bought the JC Penney stock on Monday October 11th at $33.12, you would have lost more than 2%. The S&P 500 ETF (SPY) returned 11.8% since then. What is interesting is what happened to JC Penney stock before the announcement.

Bill Ackman in front of Perishi

JC Penney was trading below $20 at the end of August. That’s when Pershing Square probably considered buying the stock. During the first 10 days of September, JC Penney’s trading volume was below 5 million shares. However, the trading volume jumped to 11.6 million shares on September 13th. The stock gained 5% that day even though there wasn’t any news that would affect the company. For example, Macy’s trading volume didn’t change much on that day. The next day, there were positive comments from JC Penney’s CEO. Macy’s jumped 3% and its volume doubled. JCP gained more than 7% on September 14th , and the stock price reached almost $24 per share. Its trading volume also quadrupled to 17 million shares from 4 million shares on September 10th.

During the following two week period, JC Penney’s stock moved in line with the stock market, with an 8 million shares daily volume. On September 28th , both William Ackman and Steven Roth reach the 5% ownership threshold. This implies they were trading together. JCP Penney was $25.77 on September 28th. Activist investors have 10 days to report their transactions to the SEC. Considering Bill Ackman had more than 15% of JC Penney stock when he reported his activities on October 10th, he had 10 days to acquire another 10% of JC Penney in the open market.  Vornado also acquired another 5% during these 10 days, so the trading was really tight.

During the following 7 trading days, JC Penney stock sees enormous trading volume. A total of 115 million shares changed hands and the stock price increased 22%. SPDR Retail ETF (XRT) increased by 0.5% during the same time frame, and Retail Holders Trust (RTH) increased less than that. Bill Ackman And Steven Roth wanted to finish buying before they revealed their cards. As a result, there was a huge imbalance between supply and demand. This is a perfect example of how technical analysis (or trend following) would signal a strong buy and be successful. The time to profit from Ackman’s purchase was before he revealed his position. It was too late to profit after the revelation.

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

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

Bloodiest UFC Fights Ever Fought

Most Expensive Rum Brands in the World

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!