Target Corporation (NYSE:TGT) shares soared more than 5 percent yesterday after reports surfaced that Bill Ackman's Pershing Square has been accumulating shares in the company. The Bloomberg report cited "a person with direct knowledge of his plans" but the hedge fund refused to comment on the situation. Investors are hoping that the activist hedge fund will be able to unlock value and help the retailer improve its long-term outlook.

Bill Ackman is a well known activist investor who has managed above average returns for several years for his limited partners. While most of his investments are passive, he is well known for his activist approaches to unlocking value in large companies like McDonalds and Wendy's. Many are speculating that his involvement with Target will involve similar strategies aimed at unlocking value through the exploration of strategic alternatives. These could include a recapitalization, special dividend, spin-off of particular brands, restructuring or even an outright sale of the company.

Investors will have to wait until Mr. Ackman files a Schedule 13D with the Securities and Exchange Commission in order to figure out his plans. If the rumors of him acquiring a 5 percent stake in the company is true, then he will be forced to file with the SEC within the next 10 days. This filing should outline whether or not he is considering strategic alternatives for the retailer. Alternatively, if he ends up filing a Schedule 13G, we will know if he is in it passively for the time being. Regardless, Target is definitely a stock to watch as this situation unfolds.

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