Even if Bill Ackman is unable to make humongous strategic changes or value-extracting deals for Target (NYSE: TGT), his investment in the retailer has limited downside, according to breakingviews. Although Ackman could potentially "push for a sale of Target's credit card business, a reengineering of its real estate portfolio, or more aggressive share buybacks," none of these seem very likely at present.Target probably wouldn't sell its credit card business because its becoming a more and more important contibutor to earnings. Moreover, reengineering the real estate portfolio or increasing the already-aggressive buyback would probably require borrowing. At the present time, borrowing at attractive rates is difficult.
Despite Target's rise in the last few years, the stock remains cheap. As breakingviews noted, the stock trades for just 14x earnings -- the same price as Wal-Mart (NYSE: WMT) -- despite growing much faster than Wal-Mart and possessing much more favorable growth prospects than Wal-Mart.
After soaring nearly 15% when Ackman's $2 billion investment in the company was rumored and revealed, the stock has come back to earth and retraced all of those gains. At these levels, Target is an appealing investment opportunity. The stock is undervalued vs. its peers and possessing loads of free options, most importantly the potential for Ackman to unlock value.
Target looks like an incredible long-term investment and I've been contemplating adding it to my long term buy and hold portfolio for the last month.
Why is gold making a new high, trading at $1,118.00 per ounce?
Chasing Value: Ten stocks for 2010 -- Part 1 
Closing Bell: A six-day rally (AIG, REGN, M, MOT, PALM, RIMM)
