Ackman sells FBHS and FDO, Einhorn Buys Oaktree – ValueWalk Premium
Bill Ackman

Ackman sells FBHS and FDO, Einhorn Buys Oaktree

Ackman sells FBHS and FDO, Einhorn Buys Oaktree

Pershing Square Capital Management recently exited Fortune Brands Home & Security Inc (NYSE:FBHS) and Family Dollar Stores, Inc. (NYSE:FDO). The hedge fund’s head, activist investor, Bill Ackman said that his firm has just sold its entire stake in the two companies.

The stock in both of these firms has been increasing steadily, and most analysts are of the opinion that the hedge fund was pulling out early so that they can get profits, and use them on other investment ideas that they may have.

However, as the hedge fund left its position on FDO, Nelson Peltz's Trian Partners remain strong shareholders in the company. At the same time, David Einhorn, a colleague of Ackman, purchased 1,679,750 shares of Oaktree Capital Group LLC (NYSE:OAK) recently at around $39 per share. Oaktree just had an IPO a few weeks ago. The company was valued at ~$7 billion. The $75 billion asset manager, is run by one of the best value investors, Howard Marks. Marks is an expert in the distressed debt markets, although he invests across the capital structure.

In the most recent earnings report from FDO, growth of sales was put at 4.5%, and earnings per share was placed at $1.15, an increase of around 17% in yearly comparison.

The giant company has also been making significant changes in the management structure in a bid to ensure that growth of the company continues. Mary Winston was appointed the Chief Financial Officer, and who previously headed Giant Eagle; a grocery chain that has an estimated value of around $9 billion. Mike Bloom was also appointed as the Chief Operating Officer in September last year, and critics and shareholders are of the opinion that he has been of great help in moving the company forward.

Therefore, performance for Family Dollar has been quite impressive. In fact, it was this performance that first attracted Bill Ackman in to buying its stocks. Stores in the Family Dollar chain usually sell items for less than $10, and with unemployment being high, and the economy having a recession, a large number of people are turning to these $10 stores so that they can be able to spend as little as possible. So, FDO impressive performance is to a large extent based on its hold on the retail segment of the market.

Additionally, the latest earning results from Family Dollar were quite impressive. The quarter earnings for the company beat the predictions put forward by Zacks Consensus Estimate by a few cents, jumping from 98 cents to reach 17.3%.  Electronic cigarettes had increased sales of 9.4%, while consumables made an appearance with increased sales of 12.9%. But apparels were down by 5.9% as well as home products which decreased by 0.5%. FDO increased its revenue to $2,458.6; making an 8% increase when compared to the previous year’s quarter, but the revenue fell short of the $2,461 prediction put forward by Zacks Consensus Estimate.

Earnings for the next quarter are also expected to increase around $1.01 and $1.11 per share, and predictions for the whole year are put at $3.55 to around $3.75 earnings per share. Therefore, FDO has been having a solid performance, and it looks as if it will continue with this showing.

However, Family Dollar faces stiff competition from Dollar General Corp. (NYSE:DG) and Wal-Mart Stores, Inc. (NYSE:WMT), but it predicts that its net sales for the fiscal year 2012 will increase by 9-10%. Therefore, FDO looks to be the stock of choice for investors looking to make some cash in the market.


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