Shares of ADT Corp. rose the most in more than eight months on speculation that hedge-fund manager William Ackman may take a stake in the largest U.S. home security company, said a William Blair & Co. analyst.
ADT, which was spun off from Tyco International Ltd. last year, gained 5.2 percent to $42.03, according to preliminary closing figures in New York Tuesday, after trading as high as $42.75, the biggest intraday gain since Oct. 25. Shares of the Boca Raton, Florida-based company had dropped 14 percent this year through Monday.
Ackman’s Pershing Square Capital Management LP is raising funds over the next 10 days to buy a stake in a large U.S. company with high barriers to entry, pricing power, cash flow and in a predictable business, according to a letter by the hedge fund manager. ADT meets all those criteria, William Blair’s Nick Heymann said today in an interview.
“We don’t think it’s anything related to fundamentals,” Heymann said of ADT’s share price gain Tuesday. “It probably has something to do with speculation in regards to this whole thing of Ackman putting together a new single-stock fund.”
Heymann, who is based in New York, has an outperform rating on the shares, the equivalent of a buy.
Sarah Cohn, a spokeswoman for ADT, declined to comment in an e-mail response to questions.
ADT shares are cheap after they dropped from about $50 in March amid concern that media companies will push into home security and eat away its market, Heymann said. That’s not going to happen very quickly because the cable companies don’t have their own sales force, dealerships and installation teams, he said.
“The pace at which the folks in the media world enter residential security is probably slower than a lot of analysts think,” Heymann said.
ADT has about 25 percent of the home market and Protection One Inc., which is owned by private equity, is its biggest competitor with 4 percent, Heymann said.
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