Hungry for McDonald's

Such notifications are typically made by investors who are planning to seek control or influence at a public corporation in some way. Wednesday's report appears to confirm Ackman's intentions to try and force change at McDonald's.

"This is a great situation because it's a great company, the fundamentals are improving, and there's a tremendous opportunity to create value with the steps [Ackman] has pushed for," says Ken Shubin Stein, a hedge fund manager with Spencer Capital Management. "His ideas make sense, and ideas that make sense to gain a following, but either way, the stock gets momentum out of all this."

Shares of McDonald's were recently trading at six-year highs, up 81 cents, or 2%, to $39.87. The stock is up 18% for the year.

Ackman has said that shares of McDonald's could be worth as much as $61. In his recent letter, Bloomberg said, the hedge fund manager credited the company with introducing products, restaurant renovations and advertising that led to sales gains. But he said its plan to sell restaurants, buy back stock and increase its dividend "has not gone far enough."

Ackman couldn't be reached for comment on this story. In a statement, McDonald's said, "We wouldn't comment on what Pershing Square said. As far as our business success is concerned, McDonald's performance speaks for itself. Our Plan to Win has driven 40 consecutive months of positive worldwide sales increases and double-digit increases in earnings per share for the past three years.

"In addition, since early 2003 McDonald's share price has more than tripled, a clear indication of the confidence investors continue to have in McDonald's business strategies."

The company reported a whopping 57% jump in second-quarter earnings in July. In the first half of the year, the company repurchased $1.8 billion shares, part of a plan to return as much as $10 billion to shareholders in dividends and stock repurchases through 2008.

"As passive investors, we win either way in this situation," says Tilson. "Ackman is a bold investor and has a big commitment in McDonald's to buy stock. We think his proposals make a lot of sense, and his actions also give us a nice tailwind."