This article is part of a series that provides an ongoing analysis of the changes made to Pershing Square's US long portfolio on a quarterly basis. It is based on Ackman's regulatory 13F Form filed on 11/14/2016. 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 for the fund's moves during Q2 2016.
Ackman's US long portfolio decreased ~28% from $7.51B to $5.41B this quarter. The number of positions remained steady at 9. The portfolio remains heavily concentrated with a few huge bets. The top three positions account for 62.03% of the total portfolio value: Restaurant Brands International, Mondelēz International, and Air Products and Chemicals.
In addition to partner stakes, the fund also invests the capital from Pershing Square Holdings (OTCPK:PSHZF), a public entity that debut in Euronext Amsterdam in October 2014. This was set up primarily to increase the amount of capital invested that is permanent. Pershing Square Holdings has underperformed the S&P 500 since its EOY 2012 inception. Its original flagship fund's (2004 inception) track record is outstanding with returns of ~20% per annum.
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Chipotle Mexican Grill (NYSE:CMG): CMG is a 4.34% of the portfolio stake established this quarter at a cost-basis of ~$405 per share. The stock currently trades at $400. For investors attempting to follow Pershing Square, CMG is a good option to consider for further research.
Note: A form 13D/A filing last month showed Pershing Square owning 2.88M shares at a cost-basis of ~$406. The total outlay is huge: ~$1.17B.
Canadian Pacific Railway (NYSE:CP): CP was Pershing Square's second-largest 13F position at 16.87% of the US long portfolio as of last quarter. The stake was established in Q3 2011 with the bulk purchased in Q4 2011 at prices between $46 and $72. The original position was reduced by ~26% in Q4 2013 at prices between $123 and $157 and ~19% in Q2 2014 at prices between $144 and $185. Last quarter saw another ~29% reduction at ~$148. The disposal this quarter was at ~$142. Ackman realized gains.
Air Products and Chemicals (NYSE:APD): In Q2 2013, a new 8.44% of the US long portfolio APD stake was purchased at prices between $80 and $84. By Q4 2013, the position was more than doubled at prices between $78.50 and $94.50. It had since been kept steady. Q1 2016 saw a ~63% stake reduction at prices between $103 and $133. This quarter saw another ~47% selling at prices between $126 and $145. The stock currently trades at $138 and the stake stands at 11.18% (top three) of the US long portfolio.
Note 1: Pershing Square also has a 12.95M share position in APD American style call options. Including that, the ownership stake is at 7.8% of the business (16.97M shares).
Note 2: The prices quoted above are adjusted for the spinoff of Versum Materials (NYSE:VSM) that closed last month. The terms called for APD shareholders to receive one share of Versum Materials for every two shares held.
Note 3: Pershing Square's activism led to the replacement of the CEO and the appointment of three new board members in June 2014.
Zoetis Inc. (NYSE:ZTS): The 2.61% ZTS position was first purchased in Q3 2014 at prices between $32 and $37. Q4 2014 saw a whopping 650% stake increase at prices between $35 and $45. Last quarter saw an about turn: ~49% sold at prices between $44 and $49. This quarter saw another ~87% selling at prices between $47 and $53. The overall cost-basis was around $37. The stock currently trades at $49.15. Pershing Square is harvesting gains.
The Howard Hughes Corporation (NYSE:HHC): HHC is a 7.55% of the US long portfolio position that was established in 2010 as a result of its spin-off from General Growth Properties (NYSE:GGP). The stake has remained untouched during the whole period. The stock returned ~63% in 2013 but is flat since. It currently trades at $108.
Note: A regulatory 13D/A filing on Jan 4, 2016 showed Ackman's ownership at ~5.48M shares (13.2% of business) compared to ~3.6M shares in the 13F: the filing included ~1.92M shares in currently exercisable warrants.
Mondelēz International (NASDAQ:MDLZ): MDLZ is a large (top three) 18.61% of the 13F portfolio stake established in Q3 2015 at a cost-basis in the low-40s. Q1 2016 saw a ~47% reduction at prices between $36.34 and $44.84. The stock currently trades at $42.37.
Note: Pershing Square also has a 65.26M share position in MDLZ American style call options. Including that, the ownership stake is at 5.6% of the business (88.2M shares).
Nomad Holdings Ltd. (NYSE:NOMD): In June 2015, Pershing Square revealed a ~22% ownership stake in London listed SPAC Nomad Holdings at a cost of ~$350M. After a couple of acquisitions (Iglo Group & Findus Group) last year, the business moved its listing from London Stock Exchange to New York Stock Exchange in January this year. Pershing Square controls ~19% (33.33M shares) of the company. The stock currently trades at $11.28.
Platform Specialty Products (NYSE:PAH): On 01/23/2014, Ackman disclosed a huge new stake in Platform Specialty Products Corporation in a 13G filing. Pershing Square was a PAH investor prior to its NYSE IPO. Q4 2014 saw a ~28% stake increase at prices between $20.97 and $27.74. Ackman's cost-basis is around $14. The stock currently trades well below that at $8.59. Ackman controls ~20% of the business.
Note 1: A regulatory Form 4 filing earlier this month showed Pershing Square owning 40.45M shares: around 2.29M shares sold at $8.78.
Note 2: The stock was down ~45% in 2015 and is down another ~33% YTD. Ackman discussed the position in his 2015 letter to investors: it was a mistake to increase position at $25 per share - assigned too much platform value to the business - "'platform value' is an ephemeral form of value as it requires low-cost capital, uniquely talented members of management, and the pricing environment for transactions."
Note 3: PAH has seen significant churn in upper management: Rakesh Sachdev (former head of Sigma-Aldrich (NASDAQ:SIAL)) replaced Dan Leever (~30 years at MacDermid) as CEO and there were several other resignations and role changes.
Restaurant Brands International (NYSE:QSR), previously Burger King Worldwide: QSR is currently the largest 13F position at 32.24% of the US long portfolio. The original Burger King stake was established in Q3 2012 at prices between $13.03 and $15.88. The stock currently trades at $44.
Note: Restaurant Brands International came about through the merger of Tim Hortons and Burger King Worldwide. Pershing Square had a huge investment in Burger King and those shares got exchanged for QSR shares.
Valeant Pharmaceuticals (NYSE:VRX): VRX was Ackman's largest position at 24.90% of the US long portfolio as of Q3 2015. The following quarter saw a ~15% reduction while there was a ~30% increase in Q1 2016. The stake was established in Q1 2015 at a cost basis of $196. The stock currently trades at $18.22.
Note: A 3/28/2016 13D/A regulatory filing shows Pershing Square owning 30.71M shares (9% of the business). This is compared to 21.59M shares in the 13F. The difference is the 9.12M shares in options.
Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) are other US long positions in the partnership - the holdings were disclosed in 13D filings on November 15, 2013 - as they are not 13F securities, they are not listed in the 13F report. Ackman held just under 10% of the outstanding shares of both these businesses - 115.57M shares of FNMA at a cost basis of ~$2.30 and 63.5M shares of FMCC at a cost basis of ~$2.14. The combined investment outlay was ~$400M. FNMA and FMCC currently trade at $2.79 and $2.73 per share, respectively.
Bill Ackman also has a large short book. It was disclosed earlier this year that he is short the Chinese Yuan (thesis: protection to the portfolio in the event of unanticipated weakness in the Chinese economy) and the Saudi Riyal (thesis: inexpensive way to hedge against a continued decline in energy prices). Herbalife (NYSE:HLF) is the only other short that is publicly known. There is no regulatory requirement to disclose short positions and so only ones that Ackman voluntarily discloses are known.
The spreadsheet below highlights changes to Pershing Square's US stock holdings in Q3 2016:
Disclosure: I am/we are long FMCC, FNMA.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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