Bill Ackman

Pershing Square Capital Management's activism at two companies seems to be paying off.

The fund, run by Bill Ackman, has recently built a 26% stake in the century-old department store chain JCPenney ( JCP).

While its mid-market department store competitors have struggled, JCPenney has prospered, and its stock is one of the top gainers this year, up 20%. The shares have a three-year average annual return of 41%.

JCPenney hired a new CEO, Ron Johnson, in November, and he would seem to have been hired to shake things up in the store format. Johnson pioneered Apple's ( AAPL) wildly successful retail concept, and the thinking is he can bring some of the innovations to JCPenney.

And Pershing Square disclosed early this week that it holds 24 million shares of common stock, or about 14%, of Canadian Pacific Railway ( CP), to allay rumors that it only held options, swaps and derivatives.

Ackman is using that position to agitate for the current board to replace the current CEO with his preferred candidate, former Canadian National Railway ( CNI) head Hunter Harrison, who has rejuvenated two rail companies in his career.

Canadian Pacific's shares are up 13% this year and have a three-year annualized return of 35%.

Ackman said CP is 70% the size of Canadian National yet has an enterprise value 40% as large because of its inferior profitability and asset utilization, hence his interest in new blood for the CEO post.

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