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George Soros Profits from Bill Ackman for Second Time in Recent Months

August 02, 2013 | About:
Holly LaFon

Holly LaFon

258 followers
No trade filings for George Soros have crossed the wires this week, aside from a continued reduction of Exar Corp. (EXAR) shares, but CNBC reports that the legendary investor has taken a stake in Bill Ackman’s highly publicized short, Herbalife (HLF). The move marks a second time in recent months that Soros has profited from one of Ackman’s enterprises.

Soros’ purchase of Herbalife is reported to be among his top three holdings, according to CNBC. Shares of Herbalife popped almost 10% on the news and closed at $64.09 per share on Friday after sliding 2.18%.

Ackman bet more than $1 billion on a Herbalife short in December 2012, announcing the position with a scathing and lengthy presentation on the company. After temporary faltering, Herbalife’s stock bounced back and is up almost 95% year to date, surpassing its price in the months leading up to the short announcement.

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Ackman said he expected other shrewd investors to take advantage of the price drop resulting from his presentation to take the other side of his bet at a reduced price. Indeed, gurus Carl Icahn, Daniel Loeb and Joel Greenblatt scrambled to do just that in the first quarter. Soros, however, saw further upside as of July.

Soros moved in on another Ackman stock in April, buying a 7.9% stake in J.C. Penney (JCP), making him the company’s fourth largest shareholder. At that point, JCP had declined 58% in a year. It then gained 7% on the news of his stake.

Ackman took an activist stake in JCP about two years ago, and was instrumental in replacing CEO Myron Ullman with Ron Johnson, a former Apple executive. After years of refocusing the retailer with name-brand clothes, the replacement of promotional coupons with generally low prices and the inclusion of Sephora makeup and skin care stores, the stock has yet to respond.

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Soros may see a very cheap stock price in JCP, a bottom on the stock headed toward a turnaround, a ray of hope with the return of CEO Mryon Ullman in April, or something else entirely.

In total, he owns more than 17 million JCP shares. In the first quarter, JCP announced a net loss of $348 million, increased from $163 million the previous year, and a 16.4% decline in total net sales to $2.64 billion.

See George Sorosportfolio here. See Bill Ackman’s here.

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