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Bill Ackman Discloses 15% Ownership of Fortune Brands Home & Security
Posted by: guruhl (IP Logged)
Date: October 19, 2011 04:13PM
Bill Ackman has disclosed that his hedge fund, Pershing Square Capital Management, has a 15% interest in Fortune Brands Home & Security (FBHS). He announced the holding at the Value Investing Congress in New York on Tuesday. A related 13G SEC filing came out on the same day which stated that he owned 13.4% of the company as of October 4, meaning he must have bought additional share since then. The value of his 13.4% holding (20,818,545 shares) was about $256,068,103.50, at about $12.30 per share on October 4.
Fortune Brands Home & Security is a spin-off of the former Fortune Brands Inc. The branch had annual sales exceeding $3 billion and owns Moen, the No. 1 faucet brand in North America, as well as leading cabinet manufacturer, entry door, vinyl-framed window and padlock brands, among others.
Pershing’s analyst Ali Namvar presented the Fortune Brands investment, according to Jacob Wolinsky at valuewalk.com, who was at the conference. The analyst said that the company is an industry leader with significant sale and market share. He believes the stock could go up to $22, about 70% above the market price on Tuesday.
Ackman also said that his idea is a low-risk bet on the housing recovery, which he believes could take place within the next five years. When housing starts begin to improve, he believes the stock price will too.
“I like the safety risk. The housing market will recover within the next five years. In Houston housing levels are booming. Las Vegas is not growing. So it depends where. What is missing is consumer confidence, demonstrated by demonstrations,” he said.
The National Association of Home Builders announced on October 18, the same day as Pershing’s Fortune Brands announcement, that builder confidence in the market for newly built, single-family homes rose four points to 18 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for October. It was the largest one-month gain in the index since the home buyer tax credit program artificially elevated the market in April 2010.
"The fact that the HMI continues to hover within such a narrow, low range reflects builders' awareness that many consumers are simply unwilling or unable to move forward with a home purchase in today's uncertain economic climate," said NAHB Chief Economist David Crowe. "While some bright spots are beginning to emerge in about a dozen select metro areas, the broader picture remains fairly bleak due to the weak economy and job market."
Housing starts were up 15% overall. However, the increase was due almost entirely to an increase in the production of rental housing. Single family starts were up 1.7% for October.
“We will begin to see a bit of a ramp up toward the latter part of this year, and then a more significant one next year,” Crowe predicted.
True to his activist moniker, Ackman instigated the break-up of Fortune Brands into separate companies in December 2010. The company once owned Moen faucets, Master Lock, Titleist golf equipment and Jim Beam bourbon – too eclectic a mix for one company, Ackman and Fortune’s Board of Directors agreed. Fortune Brands is now a pure-play spirits company.
Guru Discussed: Bill Ackman: Current Portfolio, Stock Picks
Stocks Discussed: FBHS,