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This article is part of a series that provide an ongoing analysis of the changes made to Pershing Square's U.S. stock portfolio on a quarterly basis. Ackman's portfolio increased in size by ~4% during Q1 2012. The number of positions held steady at 10 making it one of the most concentrated portfolios among the top hedge funds. The Top-5 positions - Canadian Pacific Railway (NYSE:CP), J C Penney (NYSE:JCP), General Growth Properties (NYSE:GGP), Beam Inc (NYSE:BEAM), and Citigroup (NYSE:C) - account for ~77.5% of the total portfolio value.

New stakes:

None.

Stake Disposals:

None.

Stake Increases:

J C Penney: a huge 17% of the portfolio activist stake, was established in 2010 at an average cost basis of around $25. The small long position in JCP Calls the fund held as of Q4 2011 was exercised this quarter to increase the JCP long position marginally. JCP traded as high as $43 during the quarter but plunged sharply following Q1 2012 results and EPS guidance. It currently trades in the $27 price-range, which is very near where Ackman acquired the bulk of the stake. For investors attempting to follow Ackman, JCP is a good choice.

Canadian Pacific Railway: a huge 23% stake, was first purchased in Q3 2011. The bulk of the stake was purchased in Q4 2011 when the price-per-share varied between $46.05 and $71.82. The stock currently trades at around $75. As an activist investor, Ackman is engaged in a proxy battle - on 05/17/2012 during the Annual General Body Meeting, he is expected to seek the election of seven directors to the board to push management changes at the company. If successful, the immediate change will be the replacement of CEO Fred Green with Hunter Harrison, the former head of Canadian National Railway Company.

Citigroup: a large ~12% stake, was increased marginally this quarter. The stake was first acquired in Q2 2010 when the price-per-share varied between the high-30s and low-40s. The stock underwent a 1:10 split in Q2 2011 (May 2011) and Ackman roughly doubled the stake in the same price-range. Though Ackman is sitting on losses on C, he is still very bullish. Currently, the stock trades at around $27. The price-per-share proved very volatile this quarter fluctuating from $26 to $38 before ending the quarter at $36.55.

Alexander & Baldwin Inc (ALEX): a ~2% position purchased in Q2 2011 when the price-per-share varied between $44.83 and $54.47, was marginally increased this quarter. The stock currently trades at around $50. The minor stake increase does not indicate a clear bias.

Stake Decreases

Fortune Brands Home & Sec (FBHS): a ~3.5% stake that Ackman received following the split of Fortune Brands - for every share of Fortune Brands, the holders received a share each of BEAM and FBHS. Ackman's average cost basis of the original Fortune Brands shares is in the low-50s range. He is sitting on substantial gains on both these holdings but has trimmed the FBHS position by a third this quarter. The substantial stake reduction indicates a bearish bias.

Family Dollar Stores (NYSE:FDO): a 2% stake, was reduced by almost 70% this quarter when the price-per-share varied between $53.63 and $63.29. A large 9% stake was established in Q2 2011 when the price-per-share varied between $51.32 and $55.74. It was reduced by 26% in Q4 2011 when the price-per-share varied between $50.01 and $59.78. The stock currently trades at around $67. The significant stake reduction indicates a clear bearish bias.

Kraft Foods (KFT): a 7.3% stake was initially purchased in Q1 2010 when the price-per-share was in the high 20s. The stake peaked at ~33 million shares in Q2 2010 but has since been consistently trimmed every quarter. During Q1 2012, the stake was reduced by a very substantial ~27% when the price-per-share varied between $37.27 and $38.88. The pattern of stake drops indicates a bearish bias.

The remaining three positions - BEAM Inc , General Growth Properties , and Howard Hughes (NYSE:HHC) were untouched during the quarter. BEAM and GGP positions are huge ~15% stakes while HHC is a 3% position. The former two indicate a bullish bias but Ackman acquired the stakes at much lower prices - BEAM before the spin-off in 2010 at ~40% of the current stock price and GGP during bankruptcy in Q2 2009 in the $1 price-range.

The spreadsheet below highlights changes to Pershing's U.S. stock holdings in Q1 2012:

(click to enlarge)

Please visit our Tracking Bill Ackman's Pershing Square Holdings article for an idea on how his holdings have progressed over the years and our previous update highlighting the fund's moves during Q4 2011.

Source: Tracking Bill Ackman'S Pershing Square Portfolio - Q1 2012 Update