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Target versus Bill Ackman


The bet here is that Ackman is eyeballing Target's vast real estate holdings and ways to go about "unlocking" that value for shareholders.

Target (TGT) has tacked on about $5 bln in market cap this week after meeting a lowered Same Store Sales goal and, as a more direct catalyst, quasi-confirmation that hedge fund manager Bill Ackman taking a 5% stake in the discount juggernaut. Ackman is a professional agitator of some renown, leaving most to assume that his investment in Target isn't going to be "passive".

So, what is Ackman up to? The facts are that Target's stock is at a 52-week high and they've already spun off non-core assets (the Department stores to Macy's and Mervyn's to private equity). The credit card division, while a possible spin-off candidate, is a huge money maker for the corporation.

The bet here is that Ackman is eyeballing Target's vast real estate holdings and ways to go about "unlocking" that value for shareholders. I've written about Target's real estate selection process, and how that process differed from that at Wal-Mart (WMT) and Kmart (SHLD). Target has the best locations in retail. That value is certainly understated on Target's balance sheet and, by Ackman's presumed assessment, in TGT's share price.

Can Target's real estate holdings be "unlocked" to the long-term benefit of Target shareholders? Maybe. We don't even know for sure that Ackman has taken his 5% stake, let alone what his agenda is going to be. Target isn't Motorola (MOT), where under-performance is a way of life and activism is welcomed by long-suffering shareholders.

For now, if Ackman has indeed taken his position, all we know about it so far is that Bill has made one heck of a good trade and he's now long a dump truck full of the Best of Breed discount chain. If Ackman is going the hard-core activist route with Target it will mark a distinct change in the strategy of activists to date.

We'll be discussing the story more tonight on CNBC's Fast Money. It's too early for conclusions but we have more than enough information to start gearing up for the Story of Ackman and Target. This should be a good one; for a stock-wonk like me just the idea of a battle for the soul of Target has me as giddy as the announcement of a huge heavyweight championship fight... You know, back when boxing was relevant.
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No positions in stocks mentioned.

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