Purchased (12/14/2009): 400 at $1.29
Target: $4.00
See Ackman letter (Q1 2009 - pub June 2009)
From Whitney Tilson Letter (12/2009):
Speaking of sub-$100 million market cap retailers, we have recently been buying Borders Group, a stock we’ve had a very up and down experience with over the years. Initially it was a disaster, falling well below $1 earlier this year, at which point we bought quite a bit more and were quickly rewarded, as it rose dramatically in less than five months to $4.34. We sold most of our position, but are now getting another bite at this apple as the stock has tumbled anew (it closed yesterday at $1.29).
This is a tough business and the odds appear stacked against Borders in light of threats from Barnes & Noble, Amazon.com, and discounters like Wal-Mart. That said, we like the current management and believe that Borders can succeed.
At today’s price, Borders has a market cap of a mere $77 million, a tiny fraction of annual revenues, which exceed $3 billion. We view this stock as a mispriced option: the company could go bankrupt and wipe out our investment, but if it merely survives – which is likely, we believe – the stock should rise many-fold.
