There are many ways to profit from the stock market. One such way is to target companies that trade at a reasonable value, have a strong brand, but could benefit from stronger leadership. These companies tend to be targets for activist investors.
Today’s activist investors tend to be firms looking to realize bigger profits from reorganizing a company, selling off a corporate division, or scaling back costs. If they’re successful, they can make market-beating returns in a short period of time.
A handful of companies have been repeated targets of takeover offers, including department store chain Macy’s (M). Another activist investor is now building a stake, looking to make significant changes.
The department store chain is currently struggling, and has delayed its latest earnings release, a fact that tends to scare off shareholders. But changes including capitalizing on the company’s real estate could help unlock value and drive shares higher.
Action to take: Over the past year, Macy’s has been trending lower, amid a concern over slowing department store sales. With a market cap of less than $5 billion, a successful activist campaign could send shares soaring higher, making for an interesting play for contrarian investors now.
Plus, at current prices, Macy’s pays a 4.2% dividend.
For traders, it may take some time to unlock value. The June 2025 $20 calls, last trading for about $1.15, could see mid-to-high double-digit returns on a rally higher into the middle of next year.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.