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.

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
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 Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!