Activist investor Bill Ackman has been beating the drums for a sale of mall owner General Growth Properties in recent days, but it’s his stake in JCPenney that’s really causing him grief.
The popular hedge-fund manager confessed to investors that his 18 percent stake in Penney had lowered returns by about $900 million this year, The Post has learned.
In the latest quarterly investor letter of his $10.5 billion Pershing Square firm, he said Penney “has cost us more than nine percentage points of gross return this year.”
The hedge fund lost 6.4 percent in the quarter, after the retailer’s shares slid from their high of $43 in February.
Through June 30, Ackman was up only 2.3 percent, according to the letter, which was obtained by The Post. That means the acclaimed investor was trailing the Standard & Poor’s 500, up 9.5 percent in the first half.
Pershing has maintained its 18 percent stake in Penney, which he began to amass in October 2010 at a reported cost of about $900 million. The stake was worth just about that amount — $911 million — at June 30, according to a filing. Penney is down 28 percent for the year.
After the poor first half, Ackman began repositioning his hedge fund, getting rid of clunkers like Citigroup to take a big position in Procter & Gamble.
P&G is “significantly undervalued” at the “current share price of $65,” he said in the letter. P&G shares have hardly budged since, and it is flat for the year.
Ackman’s retailing plays have often fizzled. Borders Group and Target are two prominent examples before Penney.
His real estate acumen, on the other hand, has been superb. Ackman has made about 77 times his initial 10 percent investment in mall developer GGP.
GGP is up 39.5 percent this year, at least partially offsetting the duds in Pershing Square’s portfolio.
Ackman’s attempts to promote a sale of the company at a big premium indicate he’s looking for more, but that may be a tall order. After the gains he’s already made, asks one observer, “how much upside is left on this investment?”
Ackman did not return a call for comment.