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

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

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

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!