Target Corporation (NYSE:TGT) appears to be a big hit with Bill Ackman after his Pershing Square Capital Management disclosed a 9.6 percent stake in the company, confirming rumors that surfaced late last week. Investors are hoping that the famed activist investor can help unlock value in the retail giant that has been experiencing a lower valuation than many feel deserved the company.

Bill Ackman noted in his filing with the SEC that he believes the leading domestic retailer has significant growth opportunities and strong operational management but remains significantly undervalued. While not going into any specific details, he noted that his fund intends to hold discussions with management aimed at correcting this undervaluation. Interestingly, he also noted that he would donate a third of his net aftertax profits from his Target investment to his charitable foundation - a bit of Karma for the activist!

So, what is Ackman planning for the company? Well, many analysts are speculating that the activist investor will try and push the company to sell its lucrative credit card portfolio, which has around $6.5 billion in receivables. While the company wasn't interested in selling the division earlier, many are speculating that it may be open to a sale once the credit cycle has peaked. Any move to sell this division would, however, provide a windfall of cash for shareholders that could be distributed through a special dividend or massive share buyback program.

In the end, the rumors that Ackman built up a stake in the retailer are true but we still have no idea what his plans are for the company. We just know that he believes the company's shares are undervalued and he intends to take some actions to unlock that value. This makes TGT a stock worth watching!

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