Update: PetSmart And Jana Partners

| About: PetSmart, Inc (PETM)

Summary

Jana Partners filed a document with the SEC claiming to have received information from an anonymous source that PetSmart has been attempting to hide poor results from investors.

Due to the risks of holding a stock where activist investors are at odds with management, I am no longer recommending PetSmart long.

With the stock up 18% since my article in June, now is a good time to take profits.

Jana Partners filed a document with the SEC on Monday claiming to have received anonymous information that PetSmart (NASDAQ:PETM) has been attempting to hide poor results from investors. These allegations have not been confirmed, but Jana Partners has sent the documents to PetSmart for review and asked the company to make the information public.

We first recommended PETM to investors in June, slightly before Jana Partners announced their involvement with the company. We have since come out in favor of a private takeover of the company. If these allegations of managing earnings are in fact true, it only reinforces the point that new management would be a positive for PETM.

In light of these allegations, and given that the stock is already up 18% since our original article, we have decided to close out our buy recommendation on PETM. The stock's higher valuation has caused its Rating to fall from Very Attractive to Attractive. In addition, we don't want to be holding a stock with the kinds of risk that come with having an activist investor at odds with management.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.