99 Cents Only Stores (NYSE: NDN) may be getting more than they bargained for with one large investor. Akre Capital Management disclosed an 11.26 percent stake in the discount chain and recommended that it explore strategic alternatives to unlock shareholder value in a Schedule 13D/A filing with the SEC. These alternatives may include discontinuing certain businesses, repurchasing shares with excess cash and refocusing on maximizing profitability rather than expanding.

Akre Capital Management focused its message on 99 Cents Only Stores' Texas market, which has experienced substantial problems. The hedge fund recommends that the company reconsider maintaining a presence in Texas and asked two key questions for management to consider:

1. What existing Texas operating data can be referenced as evidence that this new strategy will be successful, what capital will remain actually invested in the market, what profits are expected, and how will this strategy be executed?
2. Why does the company believe that expanding finite management resources on a small opportunity in Texas make sense when the remaining 90%+ of the business remains distressed and offers much greater potential?
   

"We acknowledge that the company has begun to address shareholder concerns about a turnaround plan, store growth rate, and use of excess cash," said the hedge fund in a letter to the board of directors. "We are hopeful that these actions mark the beginning of an effort by the company to be more transparent about how it plans to create per share value."

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