| NEW YORK, April 23
NEW YORK, April 23 Hedge fund manager Mick
McGuire of Marcato Capital Management has taken a new position
in Dillard's and is betting the retailer's stock can
climb to $155 a share, which would mark a 62 percent gain from
its current level.
McGuire said in a regulatory filing on Wednesday that the
department store operator has been turning itself around by
closing underperforming stores, cutting expenses and buying back
shares. He did not reveal the size of Marcato's stake.
McGuire released a presentation he made at the
Active-Passive Investor Summit on Tuesday.
Dillard's, which underperformed its peers by 200 percent
between 2000 and 2007, is currently trading at a 12 percent free
cash flow yield and has been using all of its free cash to
repurchase shares, McGuire said.
"Given the high insider ownership, if Dillard's maintains
its free cash flow and share repurchase levels, then at the
current stock price we estimate it would buy back nearly its
entire float in the next five years," he added.
The stock traded at $95.48 a share at midday on Wednesday,
down 0.4 percent, and has dropped 1.63 percent since the start
of the year.
For Marcato Capital Management, which ranked as one of last
year's best-performing hedge funds with a 26.16 percent return,
the bet on Dillard's will be a passive investment.
Marcato sometimes engages in activist campaigns and owned 13
U.S. stocks at the end of the fourth quarter, including Lear
Marcato owns a nearly 7 percent stake in Sotheby's and
McGuire has been urging that company to return more capital to
shareholders and cut costs. This week he publicly backed hedge
fund Third Point's slate in the proxy battle between the auction
house and the hedge fund.
Marcato has been waging an activist campaign at Sotheby's
since announcing the position last summer.
The new investment in Dillard's comes at a time that many
U.S. retailers are facing tough headwinds. Staples and
J.C. Penney recently said they would close some stores.
(Reporting by Svea Herbst-Bayliss; Editing by Dan Grebler)