Q2 Portfolio Changes By Activist Investor Bill Ackman's Pershing Square Capital Management

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Includes: C, FBHS, FDO, MDLZ, PG
by: Zvi Bar

Pershing Square Capital Management, run by activist investor Bill Ackman, reported its equity ownership changes for the second quarter of 2012 in a 13F filing it made earlier this week. According to the filing, during Q2 Pershing made only one new investment, while reducing and or completely selling out of multiple of its previously existing investments. Pershing Square's 13F listed that the company held only eight equities at the end of the second quarter.

The only new investment listed on Pershing Square's 13F was Procter & Gamble (NYSE:PG), in which Ackman took a massive stake. According to the filing, Pershing held 21,916,208 shares in PG, worth about $1.34 billion at the end of the second quarter. Pershing also listed holding call options for an additional 8,387,700 worth of PG shares. These two PG positions combine to be worth about $1.85 billion at the end of Q2, or roughly 25 percent of Pershing's total listed U.S. equity holdings.

For Pershing, its sizable investment in PG is likely performing well so far. Since the end of the second quarter, PG shares have appreciated by about 8.9 percent, or $5.43 cents per share, while also paying out a dividend of an additional $0.562, or 0.86 percent. Shares are not considerably higher than where they were trading during May and June, but about where they were trading in April, at the start of Q2. Pershing's PG investment has appreciated by about $180 million since the end of June. See a recent performance chart for PG:

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Pershing eliminated its position in Family Dollar Stores (NYSE:FDO). Pershing had listed holding over 2.6 million shares of FDO at the end of Q1, worth about $165 million. Ackman initiated a position in FDO about a year ago and had slowly reduced Pershing's stake over the last few quarters. The price of Family Dollar shares peaked near the end of the second quarter. See a recent performance chart for FDO:

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Pershing also eliminated its position in Fortune Brands Home & Security (NYSE:FBHS). Pershing acquired its shares of FBHS after Fortune Brands split into FBHS and Beam Inc. (NYSE:BEAM). The split occurred about eleven months ago, and shares of FBHS have appreciated about 85% since then, though they were highly range-bound over the last few months. Pershing continues to hold its shares in BEAM, which were valued at about $1.3 billion at the end of the second quarter. Ackman had trimmed Pershing's position in FBHS by about one-third during Q1, before eliminating the investment last quarter. See a recent performance chart for FBHS:

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Ackman also eliminated Perhsing's investment in Kraft Foods (KFT), which Pershing initially acquired during the first quarter of 2010 and subsequently increased during the second quarter of 2010. Since then, Pershing has regularly sold small portions of its KFT holdings. Despite this consistent prior trimming of its KFT position, Pershing still held about 15.5 million shares of KFT at the end of Q1 2012, then valued at about $590 million. See a recent performance chart for KFT:

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Though Pershing Square did not eliminate its position Citigroup (NYSE:C), it did liquidate most of it. Pershing had listed holding 2,612,863 shares of C at the end of the first quarter of 2012, then worth about $955 million, but reduced its position in the bank by about 95 percent to 1.1 million shares. Ackman apparently used the proceeds from this significant reduction to acquire a significant portion of its recently added PG stake. See a recent performance chart for C:

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In total, Pershing Square's U.S. equity portfolio value decreased by nearly half a billion between the end of Q1 and the end of Q2 of 2012, from about $8.08 billion to $7.6 billion.

Disclosure: I am long C.