Ackman Says J.C. Penney Is Attractive After His Hedge Fund Buys a Stake

Date: Wednesday, October 13, 2010
Author: Inyoung Hwang and Nikolaj Gammeltoft, Bloomberg

William Ackman, whose hedge fund disclosed a stake in J.C. Penney Co. last week, said the retailer’s shares are “very cheap” while its balance sheet is strong and its real-estate holdings are attractive.

“I like a brand that’s lived for 110 years,” Ackman said at the Value Investing Congress in New York today. The company was founded in Kemmerer, Wyoming, in 1902. “They have very high- quality assets. When you look at their real estate assets, they have a better portfolio than their competition.”

Pershing Square Capital Management LP, Ackman’s New York- based hedge fund, disclosed a 16.5 percent stake in J.C. Penney on Oct. 8. Ackman buys stock in companies he deems undervalued and then urges changes he says will boost shareholder returns. He pushed for a share buyback at Target Corp. in 2007 and lobbied restaurant chain Wendy’s International Inc. to sell land after acquiring a 9.3 percent stake. Ackman said he hasn’t met with management at Plano, Texas-based J.C. Penney yet.

J.C. Penney shares have retreated 61 percent to $33.81 since their February 2007 peak. They surged 9.1 percent the day before Ackman’s stake was disclosed to the public in a regulatory filing, jumping from about $29 at 2:45 p.m. in New York on Oct. 7 to close at $31.64.

Ackman says he’s more bullish about stocks than most investors and equities are “relatively cheap.” While he sees trouble ahead for local governments, he hasn’t bet money on that view, Ackman said.

To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net.

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net