Primarily, his investments are in financials (12%), consumer services (29.4%), consumer goods (32.3%) and industrials (4.5%).
But apart from Pershing, since 1992, Ackman has been the co-investing manager of Gotham Partners LP, which he formed with a Harvard colleague.
Ackman’s strategy is based on discovering undervalued businesses. Indeed, the New York Time states, and I quote, “being in the spotlight is often essential to his investing strategy, which usually involves taking concentrated bets either in or against a company’s stock.’’
Now, to confirm the New York Times belief about his strategy, let's look at his last best moves.
Alexander & Baldwin (ALEX): is a containership freight service provider with presence in Hawaii, Guam, China and U.S. Pacific coast ports with 17 vessels. It also operates in three segments: real estate, agribusiness and transportation.
Investors, all together, hold $221 million or 13.2% of the company. This means it is a very good move. Indeed its last quarter results reflect it:
ALEX trades at a forward 17 P/E and at a premium to the average 8 P/E for containerships. In terms of the Price to book ratio, it has been at 1.4, a premium to the 0.8 average. Shares are worth nearly $41.
It is believed that the company is undervalued. Mr. Ackman so noticed it and decided to increase his position in the company. But that is not all. His activist nature will likely push for a spin-off of one or more of the company’s divisions to maximize its value.
Kraft Foods Inc. (KFT): is the largest food and beverage corporation.
Mr. Ackman increased his position size at an estimated average purchase price of $31.21 per share.
Although it is considered that KFT is largely pressured by its competitors and is moving in a challenging market, it has shown good results. Actually, its P/E ratio is 23.8, the net profit margin is 5.07%, and dividend yields at 3.43%.
It is estimated that the company will have 8.75% EPS growth in the next five years. It is worth giving KFT a chance.
General Growth Properties Inc. (NYSE:GGP): Ackman also increased his position size in GGP at an incredible purchase price of $15.12 per share. An excellent strike! Why are shares traded at such low value? The company has been struggling to overcome challenges around bankruptcy. Fortunately, expectations are positive. Indeed it has been able to emerge strongly and now dividends are yielding at 3%.
Despite the company’s negative earnings per share, it has an attractive price-to-earnings over growth (PEG) level of 0.8.
J.C. Penney Company Inc. (NYSE:JCP): Ackman has decided to spread his share in the company despite the fierce competition of Kohl´s Corp and the good results the latter is obtaining in the market. Indeed, P/E is 12.7 for JCP and 16.1 for KSS and the operating margin basis has been of 4.9% for JCP and 10.4% for KSS. In terms of these results, KSS is much more attractive. However, Ackman has been boosted by the fact that JCP has an inexpensive valuation; it has already left a footprint in the market with its brand name and assets and has a well-deserved reputation overseas. His considerations are worth analyzing. [/b]
Lowes Cos Inc. (NYSE:LOW): The world's second largest home improvement retailer is one of Ackman's suggestions when deciding to invest. Indeed, he increased his position. LOW is an interest pick for Ackman's hedge fund because it has engaged in a stock buyback program; trades at 30% value of the fair value estimate and management has shown willingness to restrict expansion in favor of profitable growth.
Not bad at all. Moreover, despite certain headwinds, Lowe's can generate nearly $2 billion in free cash flow and a 7% yield in the current share price. Margins have been able to rebound with the improvement in volume.
This company still is an appealing long-term investment idea.