Alliance Data Systems (ADS, Financial), the leading private-label credit card issuer, sliced 43 basis points from the Fund’s return, as the stock fell 8.6% from $140.13 to $128.13. The stock dropped after the company completed a tender offer at $148.50 for 10% of its shares outstanding, or 5.1 million shares. The offer was oversubscribed, with 12.1 million shares tendered, so disappointed shareholders were left with 7 million shares to sell on the open market. We suspect many of these were held by short-term traders hoping for a quick return from the tender offer, who dumped their shares when that strategy failed. Now that the tender offer is behind us, investors will focus on the turnaround led by new CEO Melisa Miller. Miller is divesting noncore segments and pruning struggling mall-based apparel retailers from the portfolio to focus on its faster-growing verticals like beauty, home furnishing and travel. We expect our upside to be significant, as she looks to return Alliance Data to its historical double-digit revenue growth rate and a greaterthan-30% return on equity.
From Jerome Dodson (Trades, Portfolio)'s third-quarter 2019 Endeavor Fund shareholder letter.
