Why Shares of Family Dollar, Inc. and Dollar General Corp. Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Family Dollar (NYSE: FDO  ) and Dollar General Corp.  (NYSE: DG  ) were moving higher today, jumping as much as 16% and 14%, respectively, and closing 13% and 7% higher after activist investor Carl Icahn disclosed a 9.4% stake in Family Dollar.

So what: The renowned billionaire investor revealed his holding in the discount chain after hours Friday, and Family Dollar promptly responded by adopting a "poison pill" shareholder rights plan, which prevents any shareholder from amassing more than a 10% stake in the company. In his filing, Icahn called Family Dollar "undervalued," and said he may seek seats on the board to enact changes. Family Dollar recently lowered its outlook for the year and has changed its strategy to and everyday low prices model from a high-low model, which could make it ripe for activist influence.

Now what: Dollar General shares rose as investors speculated that Icahn's investment could lead to a merger between the two dollar-store chains. It's too early to say what changes could come to Family Dollar or Dollar General as a result of Icahn's move, but the famous investor has made some smart bets recently on companies such as NetflixHerbalife, and Apple and has been key in inducing the iPhone-maker to return more capital to shareholders. Given his investing resume, Family Dollar shares simply just because he took a stake in the company and sees it as an undervalued opportunity.

Will this stock be your next multibagger?
Give us five minutes and we'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks one stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.

 


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2988155, ~/Articles/ArticleHandler.aspx, 10/23/2014 9:06:19 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement