Bill Ackman

Bill Ackman

Last Update: 03-14-2017

Number of Stocks: 8
Number of New Stocks: 0

Total Value: $5,913 Mil
Q/Q Turnover: 15%

Countries: USA
Details: Top Buys | Top Sales | Top Holdings  Embed:

Bill Ackman Watch

  • A Socially Conscious Guru


    “We seek to invest in good businesses with increasingly relevant products or services, sustainable competitive advantages, quality management teams and ethical business practices.” – Jerome Dodson (Trades, Portfolio) at the Parnassus web site.

      


  • Assessing Cultural Risk in Micro-Caps

    Value investing involves finding securities that have been mispriced by the market. More often than not, the quest to find mispriced securities leads you into the small-cap arena of the market, and for good reason; small-cap stocks are generally volatile and uncovered by Wall Street, which means most investors avoid these companies. Because they are generally avoided by the rest of the investment world, value investors need to be prepared to invest in these unloved companies.


    Unloved

      


  • Bill Ackman Comments on Zoetis

    On November 9, 2016, we sold our last shares of Zoetis (NYSE:ZTS), about two years after we publicly announced an 8.5% ownership stake. Despite the high quality nature of the business and its strong management team, we sold to redeploy the capital in certain new investments.

      


  • Bill Ackman Comments on Canadian Pacific Railway Limited

    In our August 26, 2016 Investor letter, we reported the sale of our remaining 9.8 million shares of CP on August 4, 2016, approximately five years from the inception of the investment. During the course of our investment, CP (NYSE:CP)’s share price increased four times, its operating performance went from worst to nearly tied for first with Canadian National, and its credit rating improved from a weak Baa-/BBB- to a strong Baa+/BBB+. While critics often accuse activists of being short-term investors focused primarily on stock buybacks and dividends, CP is a paradigmatic example of the long- term sustainable business performance enhancements and shareholder value creation we have achieved in our core activist holdings.

      


  • Bill Ackman Comments on Restaurant Brands International

    QSR (NYSE:QSR)’s franchised business model is best described as a capital-light, high-growth annuity. The company earns high-margin, brand royalty franchise fees (4% to 5% of unit sales) from Burger King and Tim Hortons franchisee operated stores which are relatively insulated from economic cycles. As a result of the business’ structure and the market in which it operates, significant unit growth requires no capital from QSR.

      


  • Bill Ackman Comments on Platform Specialty Products

    2016 was a year of stabilization and progress for Platform (NYSE:PAH). The company solidified its core leadership team, as key new hires, including CEO Rakesh Sachdev and Ag President Diego Casanello started in early 2016. Platform returned to positive organic growth despite continued softness in its end markets, delivered on synergy commitments from its recent acquisitions, and improved its capital structure through a $400 million equity issuance and a $3 billion debt refinancing that lowered the interest rate and extended the maturity of the company’s debt.

      


  • Bill Ackman Comments on Nomad

    Nomad (NYSE:NOMD) has built the leading branded frozen food business in Europe with its acquisitions of Iglo and the non-UK assets of Findus. The frozen food business is generally stable, and Nomad enjoys high margins and strong cash-flow generation with low capital expenditure requirements and modest cash taxes.

      


  • Bill Ackman Comments on Mondelez

    Mondelez (NASDAQ:MDLZ) was created out of the breakup of Kraft Foods in 2012, and today is one of the largest global snacks companies with 2016 revenues of $26 billion. Branded biscuits, chocolate, and confectionary businesses are wonderful businesses because of their high category margins, large economic moats, high returns on capital, and attractive long-term global growth potential. Mondelez has the most attractive stable of sweet snack brands of any publicly traded food company with seven brands that each generate over $1 billion in annual sales, many of which have been building brand equity with consumers for over one hundred years. Despite owning some of the best brands in the industry, Mondelez has among the lowest profit margins in large cap packaged food, presenting a meaningful opportunity to increase efficiency that management is currently addressing.


    Mondelez made good progress on this productivity opportunity in 2016. Operating profit margins expanded by 220 basis points to 15.3%, driven primarily by a reduction in overhead costs as a percentage of sales reflecting the implementation of zero-based budgeting and the rollout of global shared services, as well as an increase in gross margin reflecting the company’s supply chain transformation. Management remains committed to its 2018 operating profit margin target of 17% to 18%, and has stated that they have good visibility to expand margins even further beyond 2018.

      


  • Bill Ackman Comments on The Howard Hughes Corporation

    The Howard Hughes Corporation (NYSE:HHC) was formed in November 2010 as a tax-free spinoff from General Growth Properties, with a collection of disparate real estate holdings designed to receive appropriate management attention and recognition in the public markets. Pershing Square helped orchestrate the spinoff, hired the management team, and has been the largest investor in HHC since its inception. Management has done a superb job growing asset value, yet, the company has not received the recognition it deserves, i.e., an appropriate valuation in the public markets. Despite a more than three-fold increase over the last six years, it remains undervalued in our view.


    HHC’s mission is to be the preeminent developer and operator of master planned communities (“MPCs”) and mixed-use properties. HHC’s management team has transformed the company’s disparate assets into a collection of high-quality core trophy assets. The majority of HHC’s value is now represented by the South Street Seaport, Ward Village in Hawaii and master planned communities in Houston, Las Vegas and Maryland. These assets are comprised of steady cash-flow generating properties and longer-term development opportunities that encompass more than 50 million square feet of real estate development potential.

      


  • Bill Ackman Comments on Herbalife

    On July 15, 2016 the FTC filed a damning Complaint against Herbalife (NYSE:HLF) and simultaneously entered into a Stipulation to Entry of Order for Permanent Injunction and Monetary Judgment (the “Permanent Injunction”). The FTC alleged that Herbalife operates illegally and alleged violations of Section 5(a) of the FTC Act. Notably, the findings of the FTC substantially agree with our long held assertion that Herbalife operates as a pyramid scheme. Select assertions by the FTC include that:


    • “[Herbalife] does not offer participants a viable retail-based business opportunity.”
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  • Bill Ackman Comments on Fannie Mae, Freddie Mac

    The 30-yr fixed rate mortgage is a unique feature of the US mortgage market that significantly improves affordability and is vital to maintaining current home values. Fannie and Freddie have historically been, and continue to be, essential to allowing for widespread access to the 30-year fixed rate mortgage at a reasonable cost.


    Since Fannie (FNMA) and Freddie (FMCC) were put into conservatorship in 2008, there have been a variety of proposals to replace or wind them down, however, none of the proposals have been adopted because there is simply no credible alternative to Fannie and Freddie. Fortunately, there is a relatively quick and simple solution to the current situation: Fannie and Freddie’s business models can be reformed by significantly increasing the GSE’s capital requirements, eliminating their fixed- income arbitrage business, substantially strengthening their regulatory oversight, and developing appropriate compensation and governance policies.

      


  • Bill Ackman Comments on Chipotle Mexican Grill

    On September 6, 2016, we announced a 9.9% stake in Chipotle Mexican Grill (NYSE:CMG) which we purchased at an average price of $405 per share. Chipotle has built a superb brand pioneering the “fast casual” restaurant industry with the success of its outstanding product offering, unique culture, and powerful economic model. We have followed the business for years, noting how it has disrupted the fast food industry with its high quality, delicious and customizable hot meals that are prepared quickly and sold at affordable prices. The company has been significantly negatively impacted by food safety issues beginning in the fourth quarter of 2015 which caused a peak decline in average unit sales of 36%. In response, the company has implemented enhanced food safety protocols over the past year, and worked to win back lost customers. While traffic and sales have begun to recover, average unit volumes were still 19% below peak levels as of the fourth quarter of 2016.


    We have always believed that a good time to buy a great business is when it is in temporary trouble. While Chipotle’s reputation has been bruised, we think that with the passage of time and improved operations, marketing, technology, and governance initiatives, the business will not only recover but become much stronger. Chipotle’s sales recovery will be neither smooth nor predictable over the next few quarters; yet, we believe that all of the key drivers of Chipotle’s powerful economic moat and long-term success remain intact. These drivers include:

      


  • Bill Ackman Comments on Air Products and Chemicals

    During 2016, Air Products and Chemicals, Inc. (NYSE:APD) continued to make substantial progress on its transformation under its CEO Seifi Ghasemi. Management has restructured the company into a decentralized organization with greater accountability while transforming the culture and aligning pay with improvements in regional operating results.


    Operating margins continued to improve during the most recent fiscal year, increasing 400 basis points to 23.1% in 2016 (APD’s fiscal year ends September 30th, and this year’s results included the non-core businesses subsequently divested and spun). This significant improvement in operating margins drove a 14% increase in earnings per share, exceeding the high end of the company’s fiscal year guidance despite 3% foreign exchange headwinds.

      


  • Bill Ackman Provides Annual Portfolio Update

    PORTFOLIO UPDATE

      


  • Bill Ackman Releases Annual Letter, Apologizes for Losing All That Money

    Dear Pershing Square Investor,


    Despite negative performance for the year, 2016 was an important year of progress for Pershing Square. Our progress is reflected in the 16.3% increase in NAV from the bottom on March 31, 2016 through the end of 2016 despite a further 390 basis point headwind from our investment in Valeant. More importantly, with the benefit of the perspective which comes from looking in the rear view mirror, we have had the opportunity to understand and learn from our mistakes, to reaffirm the core principles that have driven our substantially above-market returns since inception, and to make a number of important human resource and process changes to the organization that should serve us well going forward.

      


  • Behind the Bill Ackman Controversies


    "The 55% of our capital in activist investments has produced more than 90% of our returns." Bill Ackman (Trades, Portfolio), as quoted by Advisor Perspectives

      


  • Bill Ackman Finally Pukes: Beware of False Narratives

    A year ago we wrote about why Bill Ackman (Trades, Portfolio) should learn a bit of technical analysis. We were not suggesting he become an Elliott Wave nut or anything, but that he should adopt the risk-management philosophy of a technician. Technical analysis clearly defines when to exit a trade. And with this clarity comes superb risk control — our number one job as traders.


    But, of course, our advice fell on deaf ears. Ackman continued to ignore all the technical sell signals in his very public Valeant (NYSE:VRX) position. From that time, the stock has dropped another 65%.

      


  • 9 Stocks Mario Gabelli Continues to Buy

    Mario Gabelli (Trades, Portfolio) is the founder, chairman and CEO of Gabelli Asset Management Co. Investors (GAMCO Investors) a $30 billion global investment firm headquartered in Rye, New York. He manages a portfolio composed of 816 stocks with a total value of $15.827 billion. In the third and fourth quarters of 2016 the guru bought shares in the following stocks:


    Platform Specialty Products Corp. (PHA)

      


  • Bill Ackman Vs. Herbalife Documentary Opens in Theaters March 17

    The Wall Street movie documenting Bill Ackman (Trades, Portfolio)'s crusade against multi-level marketing company Herbalife (NYSE:HLF) and Carl Icahn (Trades, Portfolio)'s opposing position has been making its way around film festivals and opens in theaters Friday, March 17.


    Writer and director Ted Braun explores whether or not Herbalife is a pyramid scheme exploiting its members and not delivering the income it promises them as Ackman has said. Ackman, the manager of hedge fund Pershing Square, has spent considerable effort to expose the company, but also stands to make billions if it fails.

      


  • Did Ackman Make the Right Decision to Sell Valeant?

    Bill Ackman (Trades, Portfolio)'s decision to sell his long-standing stake in Valeant Pharmaceuticals (NYSE:VRX) has attracted plenty of attention over the past week. His decision to throw in the towel may have come as a surprise to many considering his previous comments, and it is fair to say he has attracted lots of criticism both while in the position and after exiting.


    It is hard not to feel at least a bit sorry for this former rock star hedge fund manager as he faced the same problem most investors will have to face at least once in their career: when to sell a loser.

      


  • Oakmark: The Psychology of Ownership and Investing

    Lauren Harvey is a product specialist across all of the firm’s investment strategies. Before joining Harris Associates in 2016, Lauren spent nine years at UBS Asset Management, most recently as a fundamental, value-oriented equity specialist. Prior to UBS, she worked in financial reporting at a Chicago-based bank holding company. Lauren has an MBA from the University of Chicago Booth School of Business (2011) and completed her undergraduate studies at Southern Methodist University (2005).


    Through his pioneering work with children, famed psychologist Jean Piaget uncovered a profound truth about human nature: Our sense of ownership develops extraordinarily early. But why do we feel such inherent attachment to things? A brief exploration of the psychology of ownership helps answer this question and gives us confidence in the investment approach we take at the Oakmark Funds.

      


  • Bill Ackman Has Had Enough Precipitous Declines for One Stock, Sells Valeant

    After preparing everyone for a different sell by filing a prospectus to unload Chipotle (NYSE:CMG) last week, Bill Ackman (Trades, Portfolio) exited his entire stake in Valeant Pharmaceuticals (NYSE:VRX), a stock that has haunted his returns and contributed to the worst year in his fund’s history.


    Ackman is selling his 7.26% stake of 18,114,432 shares of Valeant for around $11.04, their high Tuesday, before the price plunged 10.07% to $10.89 to close after his public filing was released. The price represents an almost 96% drop from the stock’s July 2015 high.

      


  • New Feature Announcement: The User Manuals

    As we ring in March 2017, we are pleased to announce a new feature on GuruFocus, the User Manuals. Like cooking recipes, these user manuals give detailed instructions on how to use our most popular features on the website.


    Throughout the past few years, GuruFocus introduced several new features for our Premium and Premium Plus members, including customized series in Interactive Charts, custom filters and screeners, backtesting, the DCF Fair Value Calculator, personalized guru lists, the All-in-one Guru Screener and backtesting, My Portfolios, GuruFocus in Excel and the Application Programming Interface (API). This article will briefly discuss each of the above features and give links to the respective user manuals.

      


  • Valeant Pharmaceuticals Is a Potential Sell

    Valeant Pharmaceuticals Inc. (NYSE:VRX) reported a net loss of $515 million during fourth-quarter 2016 based on generally accepted accounting principles and an adjusted EBITDA of $1.05 billion. For full-year 2016, the company reported a GAAP net loss of $2.4 billion, which translates to a loss per share of approximately $6.94. These values suggest that Valeant has a weakening financial outlook for 2017.


    Brief summary of earnings report

      


  • Big Money Still Long Valeant

    Valeant Pharmaceuticals International Inc. (NYSE:VRX) reported a better-than-expected quarterly profit this morning as a result of lowered costs and strength in its Bausch and Lomb subsidiary, yet its net loss widened as the company is feeling pricing pressure.


    Valeant has lost a lot of trust in the last two years. This is an understatement since in just 24 months, the stock has dropped over 90% from its highs in the 200 range. It has taken a lot of hedge funds with it, but the roster of gurus that own Valeant remains impressive.

      


  • This Guru Loves Valeant; Should You?

    Hedge funds’ final 13F forms for 2016 were published last week, and as usual, the data has been scrutinized by the financial media. There were a few surprises in the figures, including Warren Buffett (TradesPortfolio)'s new favorite position, Apple (NASDAQ:AAPL), and the general rotation away from tech toward financials.


    One position change that stands out, however, is not Buffett’s move but that of Francis Chou (Trades, Portfolio). Chou’s Chou Associates is a traditional value fund, and Chou is well known in the value community for his investing style.

      


  • Francis Chou Adds to Valeant, Trims Sears in 4th Quarter

    Francis Chou (Trades, Portfolio), founder of Chou Associates Management, started an investment club in 1981 with six of his fellow telephone repairman. Throughout the next five years, Chou worked as a retail analyst at GW Asset Management where he met “Canadian Warren Buffett (Trades, Portfolio)” Prem Watsa (Trades, Portfolio). The successful guru established his flagship fund, the Chou Associate Fund, in 1986. On an annual basis, Chou’s fund outperformed the Standard & Poor’s 500 index benchmark by approximately 7% on average from 1986 to 2010.


    Chou invests in companies with a value-oriented approach involving a detailed analysis of the strengths of companies, especially in regard to the balance sheet, cash flow characteristics, profitability, industry position, special strengths, future growth potential and management ability. During fourth-quarter 2016, the Chou Associates Fund manager expanded his position in Valeant Pharmaceuticals International Inc. (NYSE:VRX) and trimmed his position in Sears Holdings Inc. (NASDAQ:SHLD).

      


  • Bill Ackman Expands Chipotle Position, Cuts Zoetis

    Activist investor Bill Ackman (Trades, Portfolio), founder of Pershing Square Capital Management, buys the common stock of companies and pushes for changes so that the market can realize the values of these companies. Like fellow activist investor Carl Icahn (Trades, Portfolio), Ackman buys out-of-favor companies at a discount and sells them when the companies reach their appraised value.


    During fourth-quarter 2016, Ackman purchased additional shares in Chipotle Mexican Grill Inc. (NYSE:CMG) and eliminated his stake in Zoetis Inc. (NYSE:ZTS). The investor also trimmed his position in three companies: Valeant Pharmaceuticals International Inc. (NYSE:VRX), Platform Specialty Products Corp. (NYSE:PAH) and Air Products & Chemicals Inc. (NYSE:APD).

      


  • Is Value Investing Dead?

    Value investing has changed significantly since the concept was conceived by Benjamin Graham more than 80 years ago. Today it’s tough to adopt the same style as Graham. The prevalence of financial information and stock screeners online has reduced the number of opportunities available, and investors have to be quick to take advantage of any market dislocations.


    Value investing has changed

      


  • Ackman, Berkowitz May Not Get Their Fannie Mae Payout So Fast Under Trump

    Bill Ackman (Trades, Portfolio), who has sued to release Fannie Mae (FNMA) and Freddie Mac (FMCC) from government conservatorship, said this week he has increased confidence that the Trump administration would ensure and hasten the reform of the government-sponsored entities, a move that would further enrich him and a number of his hedge and mutual fund peers.


    Ackman has wagered roughly 9% of his hedge fund’s assets that the government would return the two entities, which it rescued from collapse in the 2008 mortgage crisis, to private ownership and end its confiscation of their profits. He, along with several other large stakeholders such as Bruce Berkowitz (Trades, Portfolio) of Fairholme Fund (Trades, Portfolio), have already made sizable gains on their bets, as the market hopes for an imminent and profitable decision on the lenders’ fate. Shares of Fannie Mae that traded for under 30 cents in 2013 have already surged 150% since the election.

      


  • 10 Questions With Value Investor T. Aaron Brown

    1. How and why did you get started investing? What is your background?


    I have a scenic tour background. Many turns. I was a math teacher and then a youth counselor before I started working in government. I have held agent positions with both state and federal departments. I started investing a few years out of college with a series of trial by error. My primary editor is Seeking Alpha. I like the community as it provides a lot of feedback.

      


  • Chipotle Could Be a 4-Bagger in 10 Years

    Chipotle Mexican Grill (NYSE:CMG) has been among the most successful fast food chains in recent years by providing differentiated high quality food served quickly in a good environment.


    The company claims that it uses naturally grown ingredients and serves more naturally raised meat than any other restaurant chain. Customers liked it. The number of stores grew from over 500 locations in 2006 to about 2,200 locations. But the company suffered significantly starting in November 2015 when E. coli outbreaks were linked directly to its restaurants. Comparable sales were in the negative 20%-plus range in 2016. Earnings dropped to close to zero.

      


  • US Retailers May Look Valuable, but Watch the Trap

    After some poor holiday trading updates, investors have fled the U.S. retail sector in droves in the past few weeks extending the exodus from retail stocks that has been ongoing for around six months.


    For contrarian investors, this exodus has thrown up an interesting opportunity. Shares in retailers such as JCPenney Co. Inc. (NYSE:JCP), Kohl's Corp. (NYSE:KSS), Dillard’s Inc. (NYSE:DDS), Macy’s Inc. (NYSE:M), Sears Holdings Corp. (NASDAQ:SHLD) and Nordstrom Inc. (NYSE:JWN) have fallen to 52-week lows and are now trading at relatively appealing valuations.

      


  • 3 Rules for Successfully Investing Alongside Activists

    Investing alongside activist investors can be a tantalizing proposition. There are few outright bargains in the market now and a company that is trading cheaply with a definite catalyst in an activist investor gaining control can be very appealing. We have invested alongside activists several times over the years. We have had our successes and failures, so we want to share three rules we have developed over time that we believe increase the odds of an investment alongside an activist being a success.


    1. Try to buy at a similar price as the activist

      


  • 23 Questions With Value Investor Ari M. Eden

    1. How and why did you get started investing? What is your background?


    I was exposed to it a bit as a kid with some family members who were pretty big market followers, but I really didn't get into it for myself until finishing college and realizing I better learn to supplement income. After graduation I interned at a discount brokerage and then began learning all I could about the markets.

      


  • Technology Companies Among Strong Guru Ownership Stocks

    While all investment gurus seek long-term capital appreciation, not all gurus think identically. Some gurus invest in companies with a fundamental, value-oriented approach while other gurus, like Bill Ackman (Trades, Portfolio) and Carl Icahn (Trades, Portfolio), actively invest in distressed companies and generate value through company reforms. However, regardless of their investing approach, gurus usually invest in companies that offer high value potential to their fund and shareholders.


    In Part 1, we analyzed the Aggregated Portfolio of Gurus, which lists the 50 companies with the highest combined weighting among the gurus selected through the “Personalized List” feature.

      


  • Bill Ackman Reduces Valeant Stake to Benefit Clients

    As another tumultuous year has wiped out nearly 85% of Valeant Pharmaceuticals’ market value, Bill Ackman (Trades, Portfolio), one of its biggest investors, sold some shares to give his clients a year-end tax break.


    Ackman’s Pershing Square hedge fund initiated its Valeant (NYSE:VRX) position in early 2015 during the drugmaker’s heyday north of $177 per share, before its price went into freefall beginning in July that year. In the first quarter 2016, Ackman responded by purchasing 5 million additional shares, but Valeant’s further drop has resulted in a total estimated loss of 81% on the stake, a blow to returns at his fund.

      


  • Bill Ackman Comments on Herbalife

    On November 1, 2016, Herbalife (NYSE:HLF) reported its third quarter financial results. Modest financial performance in the quarter, disappointing 2017 guidance and the unexpected announcement of a CEO transition caused the stock to decline. HLF stock has traded down more than 33% since the announcement of the company’s settlement with the FTC on July 15th, 2016, a 15% year-to-date decline, as investors have come to increasingly ignore the company’s fraudulent characterization of the FTC settlement. At its December 2, 2016, price of $47.99 per share, HLF currently trades at approximately the price at which we shorted the shares in 2012.


    On a consolidated basis the company reported net sales of $1.1 billion for the quarter, up 1.7% year-over-year. Headline adjusted net income of $105 million for the quarter (down 3% YoY) translated into adjusted EPS of $1.21 (down 4% YoY). On a constant currency basis the company reported net sales growth of 5%, driven by EMEA (+15%), Mexico (+14%) and North America (+10%).

      


  • Bill Ackman Comments on Nomad

    Nomad (NYSE:NOMD) reported Q3 results in late November.


    Third quarter like-for-like sales declined 3.3%, which marked the fourth straight quarter of sequential improvement in like-for-like sales trends. This sequential improvement in trends is consistent with management’s guidance and driven by the company’s shift in its strategy to refocus its resources on its core product offerings.

      


  • Bill Ackman Comments on Platform Specialty Products Corp

    In September, Platform (NYSE:PAH) hosted an investor day where it provided a detailed explanation of the secular growth drivers and unique competitive positioning of each of its Performance and Agricultural Solutions businesses, along with long-term guidance of 4% annual organic revenue growth and high-single digit annual EBITDA growth.


    The company also announced that it had reached a revised agreement with Permira to settle its $600 million preferred stock liability related to the Arysta acquisition. Under the revised agreement, Platform has the option to pay Permira $450 million in cash and 5.5 million shares, which equates to $500 million at the current market prices and represents a savings of $100 million relative to the original agreement. To finance the cash portion of the agreement, the company raised $400 million of equity and, as a result, was able to refinance $2 billion of its debt, reducing the rate on this debt by 50 basis points and extending the maturities by three years to 2023.

      


  • Bill Ackman Comments on Valeant Pharmaceuticals International

    Since our last update in August, Valeant (NYSE:VRX) has bolstered its management ranks, improved dermatology average selling prices (ASPs), stabilized its salesforces, and experienced acceleration in Salix script trends. Despite these positive developments, financial results continue to be challenged as certain unexpected events impacted Valeant in Q3 and weakness in Valeant’s U.S. Diversified Products segment continues to weigh on near- to medium-term earnings.


    Valeant reported quarterly revenue of $2.48 billion, Adjusted EBITDA of $1.16 billion and Adjusted EPS of $1.55. This represented sequential improvement of 2%, 7% and 11%, respectively, as the business continues to stabilize following the disruption of recent quarters.

      


  • Bill Ackman Comments on Fannie Mae and Freddie Mac

    Fannie (FNMA) and Freddie (FMCC)’s underlying earnings continue to progress modestly in the core mortgage guarantee business, while the non-core investment portfolio continues to shrink to a smaller and appropriate level, resulting in a more profitable and lower-risk business model. The strength in underlying earnings growth reflects two factors: (1) an increase in guarantee fees as the fees on new mortgages exceed the average fees on the existing portfolio, and (2) lower credit losses as the portfolio’s credit quality has meaningfully improved since the financial crisis.


    There were a number of legal developments this quarter. In the Federal Court of Claims case, Judge Sweeney granted the plaintiffs access to 56 documents the government had claimed were privileged, many of which were contemporaneous with the period just prior to the Net Worth Sweep and involved high level government officials. The plaintiffs have not yet had access to the privileged documents as the government has appealed Judge Sweeney’s ruling. We find it interesting that the government is fighting so hard against this ruling, as it has previously complied with the judge’s prior motions to turn over documents.

      


  • Bill Ackman Comments on The Howard Hughes Corp

    Net Operating Income (NOI) from HHC (NYSE:HHC)’s operating assets (consolidated and owned) decreased sequentially from $35.2 million to $31.3 million (and year-over-year from $31.9 million), largely due to headwinds in Houston that continue to negatively impact HHC’s owned hotels in Houston ($3.5 million sequential decline in hospitality NOI). HHC held steady its projected stabilized annual NOI estimate (which excludes the South Street Seaport) of $215 million and kept constant its estimated stabilized hospitality NOI levels. Land sales in its Master Planned Community (MPC) segment decreased from $59 million to $32 million year-over-year in Q3 and sequentially from $34 million due primarily to a $27 million reduction in commercial sales from Q3 2015.


    In Hawaii, at its Ward Village property, construction of the Waiea, HHC’s first residential tower, is nearing completion. HHC has started collecting the proceeds from the sale of these units. HHC’s second tower (Anaha) recently topped out and is on schedule to be completed by mid-summer 2017. The company now has five condominium projects for sale, four of which are under construction (see status of each one below). HHC executed 35 new sales contracts since the end of Q2, representing 11% of the remaining inventory under construction (reducing the number of unsold units to 280 from a total inventory of 1400 units).

      


  • Bill Ackman Comments on Restaurant Brands International

    QSR (NYSE:QSR) reported strong results by executing on its three key growth drivers: same store sales, net unit growth, and operational efficiency. In the third quarter, the company generated 2% same store sales growth in its Burger King and Tim Hortons concepts. While same store sales growth has decelerated over the last few quarters, it is still at a healthy overall level. Strong international growth was partially offset by weaker U.S. performance at Burger King where same store sales declined 0.5%. The decline in the U.S. is partially due to a tough comparison with last year’s quarter’s 5% growth, but also reflects a more difficult industry environment as the recent decline in food costs has widened the price gap between restaurant and grocery to historically high levels, resulting in lower restaurant traffic.


    QSR achieved net unit growth of 3% which management expects will accelerate in the fourth quarter. In addition, Tim Hortons recently announced two master franchise agreements in the U.K. and the Philippines, which should accelerate future growth.

      


  • Bill Ackman Comments on Air Products

    Air Products’ (NYSE:APD) fiscal year fourth quarter earnings per share of $2.01 increased 10% over the prior year. This strong performance was driven by a 260 basis point increase in operating margins. This quarter marked the ninth straight quarter of double-digit EPS growth since Seifi Ghasemi joined Air Products as its CEO.


    Sales increased 1% as 3% underlying growth was offset by a 2% drag from foreign exchange rates and the pass-through of lower energy prices. The 3% underlying growth was driven by increased volumes as pricing remained flat. Growth capex contributed to volume growth in Asia, while global economic weakness led to weak volumes elsewhere around the globe.

      


  • Bill Ackman Comments on Mondelez

    On October 26, Mondelez (NASDAQ:MDLZ) reported third quarter 2016 results. Underlying organic growth was generally in-line with the company’s categories at nearly 2%, including volume growth of 1.3%. This was the third straight quarter of positive underlying volume growth and a sequential acceleration from the second quarter. We note that Mondelez is one of the few large cap packaged food companies that is demonstrating any underlying volume growth, however modest. While the global growth rate of Mondelez’s snacking categories has moderated over the course of the year primarily due to macroeconomic headwinds, we continue to believe that the long-term outlook for these categories remains robust, especially in the emerging markets where Mondelez has large market shares and robust routes to market.


    Operating profit margins expanded by 220 basis points to 15.8% in the quarter, driven primarily by a reduction in overhead costs as a percentage of sales reflecting the implementation of zero-based budgeting and the rollout of global shared services, as well as an increase in gross margin reflecting the company’s supply chain transformation. Year-to-date, the company continues to show progress with its significant cost savings opportunity and productivity initiatives, and remains on track to reach its 2018 margin target of 17% to 18% with further upside beyond 2018.

      


  • Bill Ackman Comments on Chipotle Mexican Grill

    On September 6th, we announced a 9.9% stake in Chipotle Mexican Grill (NYSE:CMG) which we purchased at an average price of $405 per share. Chipotle has built a superb brand pioneering the “fast casual” restaurant industry with the success of its outstanding product offering, unique culture and powerful economic model. We have followed the business for years, noting how it has disrupted the fast food industry with its high quality, delicious and customizable hot meals that are prepared quickly and sold at affordable prices. The company has been significantly negatively impacted by food safety issues beginning in the fourth quarter of 2015 which caused a peak decline in average unit sales of 36%. In response, the company has implemented best-in-class food safety protocols over the past year, and worked to win back lost customers. While traffic and sales have begun to recover, average unit volumes are still 19% below peak levels.


    We have always believed that a good time to buy a great business is when it is in temporary trouble. While Chipotle’s reputation has been bruised, we think that with the passage of time and improved marketing, technology and governance initiatives, the business will not only recover but become much stronger. Chipotle’s sales recovery will be neither smooth nor predictable over the next few quarters; yet, we believe that all of the key drivers of Chipotle’s powerful economic moat and long-term success remain intact. These drivers include:

      


  • Bill Ackman Comments on Zoetis

    On November 9th we sold our last shares of Zoetis (NYSE:ZTS), about two years after we publicly announced an 8.5% ownership stake. Despite the high quality nature of the business and its strong management team, we sold to redeploy the capital in certain new investments.


    We purchased our stake in Zoetis at an average cost of approximately $37 per share. Shortly thereafter, we met with the Zoetis management to learn more about the company and to discuss our views on potential initiatives to create shareholder value. On February 4, 2015, Zoetis agreed to add then-Pershing Square investment team member (and healthcare industry veteran) Bill Doyle and Actavis Executive Chairman Paul Bisaro to the board on April 13, 2015.

      


  • Bill Ackman Comments on Canadian Pacific Railway

    In our August 26, 2016 Investor letter we reported the sale of our remaining 9.8 million shares of CP (NYSE:CP) on August 4, 2016, approximately five years from the inception of the investment. During the course of our investment, CP’s share price increased nearly four times, its operating performance went from worst to nearly tied for first with Canadian National, and its credit rating improved from a weak Baa-/BBB- to a strong Baa+/BBB+. While critics often accuse activists of being short-term investors focused primarily on stock buybacks and dividends, CP is a paradigmatic example of the long-term sustainable business performance enhancements and shareholder value creation we have achieved in our core activist holdings.

    From Bill Ackman (Trades, Portfolio)'s Pershing Square third-quarter shareholder letter.   


  • Bill Ackman Releases Pershing Square 3rd-Quarter Letter

    Dear Shareholder:


    The performance of Pershing Square Holdings, Ltd. is set forth below1.

      


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