Shares of Fred's jumped more than 5 percent Friday in midday trade after Alden Global Capital unveiled a roughly 25 percent stake in the discount store operator.
Alden said in a filing it purchased the shared based on the "belief that the shares are undervalued and represent an attractive investment opportunity." The stake would make Alden the top shareholder in the company, according to Thomson Reuters data.
The activist investor also said it intends to speak with Fred's board and shareholders about the company's agreement to acquire 865 stores and certain assets of Rite Aid.
Earlier this week, shares of Fred's rocketed 81 percent after the company announced its plan to buy the stores. Alden was able to catch that upside as it had been building a stake in Fred's, The Wall Street Journal reported, citing a source and document.
With Friday's gains, Fred's stock is up more than 24 percent this year.
Fred's 5-Day performance
—CNBC's Peter Schacknow and Reuters contributed to this report.