Bill Ackman has now accumulated two very large positions in JC Penney (NYSE:JCP) and Canadian Pacific Railway (NYSE:CP) and in both companies has has undertaken an aggressive strategy to shake up management with an eye towards dramatically improving results. He has already accomplished this goal at JCPenney by recruiting Ron Johnson, one of the main visionaries behind Apple's (NASDAQ:AAPL) legendary Apple Stores in order to greatly improve the retailing experience at JCP. At CP he must wait until the annual shareholders meeting on May 17 to see if shareholders will adopt his plan to elect a new slate of directors, and hire his desired candidate for CEO, Hunter Harrison -- a highly regarded executive in the rail industry who, according to Ackman, turned around Canadian National Railway, remaking it into one of the most efficient, and profitable rail operators in the world.
The centerpiece of this strategy -- the change of management both at JCP and CP by focusing on one singular person to turn around the company brings to mind a verse from Psalms(144:4), " Man is like unto a breath; his days are as a shadow that passeth away". Meaning, that G-d forbid I don't wish any harm on Ron Johnson or Hunter Harrison, but to think so much of Mr. Ackman's strategy rides on the ability of two normal people -- whose excrement smells just like the rest of ours -- seems very risky. I don't want to, nor do I have the ability, to fully dive into the particulars of both of these companies and to see whether or not Mr. Johnson and Mr. Harrison can truly make a difference, but I think having so much of a strategy ride on one person exposes shareholders to significant risk.
Mr. Ackman has a long track record of success, and if investors think they have a competitive advantage by riding on his coattails, I understand. But I think I have raised an issue that investors who want to ride on his train need to seriously consider before investing in JCP and CP.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.