Two of the best performing stocks in the S&P 500 today can credit their gains to some speculative sleuthing, or guessing, by the market.
The shipping giant FedEx Corp. FDX +4.37% popped 4.4% to $103.05 on six times its typical volume. Meanwhile, security-system company ADT Corp ADT +5.18%rose 5.2% to $42.02 on twice its average volume. Both were among the 10 biggest gainers in the S&P 500 on Tuesday.
The reason for both gains: Speculation one of them may be the mystery target of activist Bill Ackman’s Pershing Square Capital.
Ackman sent a letter to investors recently saying he was looking to raise a new $1 billion fund that would target one single company for an activist play. Though he didn’t name the target, the letter set some broad parameters: The company has a large capitalization; it is investment-grade; it is a U.S. corporation that operates in one business; and the target has a high barrier to entry, according to people familiar with the letter.
Bloomberg News reported on the letter on Monday and investors immediately started trying to guess.
Of course, that at least two companies that could fit his description were jumping Tuesday shows the market has to be wrong about at least one. And the guesses are very different, with FedEx worth about $30 billion and ADT worth only $9 billion.
Representatives from FedEx and ADT both declined to comment on market rumors and speculation.
FedEx fits best among the rumor-mill targets. Its market cap is above $30 billion. A 5% position, therefore, would be worth about $1.5 billion and it has one main competitor — its nemesis UPS, which has a higher price-to-earnings ratio according to FactSet. ........