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October 19, 2009 – Comments (4) | RELATED TICKERS: O

Today kicks off an interesting conference called the "Value Investing Congress."  In the past a ton of great stock ideas have been presented at this symposium.  Not only do good ideas come out of events like this, but the speeches that the famous investors who pitch their ideas make often move individual stocks.

I believe that Pershing Square Capital Management's Bill Ackman is scheduled to speak today.  He's always good for a few percentage points on up or down on the stock that he picks or pans.  If I had to make an educated guess, I'd say that he's going to bash Realty Income Corp. (O) again in his speech this morning like he did in a speech last week, (see link: Ackman says he is shorting Realty Income Corp.)  If so, today might be a good one to short it for a short-term trade if it isn't down too much already.

I love the title of the report that Ackman issued on Realty Income, "O No!" HA, what a classic line.  Many income investors, like myself, are familiar with Realty Income.  It's a REIT that leases space to convenience stores and casual restaurants, including Sports Authority and Friendly's.  Ackman believes that the company's current 97% is destined to drop.  Looking at the aforementioned companies, I would not be surprised if he was correct.  Much to my dismay, Friendly's recently closed its location in my town and its building is still unoccupied.  I have find memories of going there after bass fishing trips in our aluminum Sears rowboat with my father as a child.  Alas, all good things come to an end and while Friendly's ice cream is good, its food sucks.

I digress, Pershing Square's research note on the company states that a number of O's tenants have already filed for bankruptcy protection and it believes that some of them may be forced to liquidate.  Ackman blasted the company's lack of transparency as well.

Anyhow, I plan to keep an eye out for information on any interesting presentations from today's Value Investing Congress.


4 Comments – Post Your Own

#1) On October 19, 2009 at 10:53 AM, JakilaTheHun (99.92) wrote:

I don't particularly like O, but it also seems like a silly "hedge" to Ackman's long position in General Growth (post-bankruptcy).  O isn't very leveraged, has some of the most insane diversification I've ever seen, and is pretty much, a very dull investment that mostly trades sidewards and pays out its dividends.  I can understand Ackman's case to a degree, but I don't see how on Earth going short one of the least risky REITs is going to offset establishing a long position on a (theoretically) high-risk REIT in post-bankruptcy status. 

All the media coverage of Ackman's short on O will probably drive the price down, but it's probably the main driver behind that drop.


Ackman believes that the company's current 97% is destined to drop.

Assuming you meant 97% occupancy rate here.  I agree with this part of Ackman's thesis, but the price might already reflect this.  I also agree with Ackman that the company lacks much transparency, which is one reason why I'd never invest in it.  

Maybe this is a stroke of genius by Ackman, but still ... I'm just not totally buying his thesis.  The macro argument makes sense, but given the low leverage, and general stability of this stock, coupled with the very large dividend, it doesn't make any sense to me as a short or "hedge".  Plus, the price might already account for this negative forward outlook.

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#2) On October 19, 2009 at 2:36 PM, PaxtorReborn (28.86) wrote:

Yeah, I wouldnt short that one the same as I would never short BPO or other more quality REITs. 

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#3) On October 19, 2009 at 4:19 PM, portefeuille (98.76) wrote:

Ackman & Pershing Square's Realty Income (O) Presentation

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#4) On October 19, 2009 at 4:25 PM, portefeuille (98.76) wrote:

Notes From The Great Investors "Best Ideas" Symposium

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