Ackman runs a concentrated portfolio with just ten stocks. In 2010 he returned 29.7% compared to 15.1% for the S&P 500. In his third-quarter 2011 investor letter, Ackman said, “… We focus our attention on the value and business progress of the companies we own rather than their daily market quotations.”
Ackman’s largest add was the purchase of 82,927 shares of Alex & Baldwin at an average price of $46. Ackman initiated the position with 172,001 shares in the fourth quarter of 2010 at an average price of $36, and added 3,389,942 shares in the first quarter of 2011 at an average price of $42 as an activist stake. In total, he owned 3,644,870 shares at the end of the first quarter.
Alexander & Baldwin is involved with real estate, transportation and agribusiness in Hawaii. On Dec. 1, 2011, the company announced that it would split into two companies: a Hawaii-based land company that will retain the name Alexander & Baldwin, and an ocean transportation company called Matson.
Each company has more than $1 billion in assets, 1,000 employees, strong balance sheets and cash flow to reinvest in future growth. The businesses will be two of the largest in the state.
Ackman added 360,200 shares of J.C. Penney at an average price of $38. Ackman initiated the position in the third quarter 2010 with 15,711,994 shares at an average price of $23. At the end of the first quarter he owned a total of 39,075,771 shares , or 17.9 percent of the company.
On Thursday J.C. Penney shares opened at $27.34, off of their 52-week high of $43.18. The company is currently undergoing a vast transition spearheaded by Bill Ackman. On May 15, it announced first quarter financial results that caused the stock price to plunge.
J.C. Penney had a first quarter net loss of $55 million, “excluding markdowns taken as a result of the company’s continuing efforts to reduce inventory levels to align with its new strategy, restructuring and management transition charges and non-cash qualified pension expense.” On a GAAP basis, it had a net loss of $163 million.
The company’s comparable store sales for the first quarter declined 18.9 percent, and it incurred a $76 million in restructuring and management transition charges.
Its outlook for 2012 includes additional restructuring charges as it continues to simplify its operations and infrastructure. It also expects inventory write-downs as it transforms its merchandise assortment to align with its new strategy. In May 15, it also discontinued its $0.20 per share quarterly dividend, which will save it approximately $175 million in cash.
Details on Ackman’s transformation plan at J.C. Penney are available here.
Ackman added 5,480 shares of Canadian Pacific Railway (CP) at an average price of $74. Ackman initiated the position in the third quarter of 2011 at an average price of $57, and bought more in the fourth quarter 2011 at an average price of $59. He owned a total of 24,159,888 shares at the end of the first quarter. Since Ackman bought his activist stake in the third quarter of 2011, shares of Canadian Pacific Railway have increased 63 percent.
In May, Ackman won his fight to get a seat on the board of the company, and his seven nominees won director positions.
In the last ten years, the company has grown revenue had a rate of 4.5 percent annually, EBITDA at 5 percent and book value at 7.6 percent. Free cash flow turned negative in 2010 and 2011. In the next four years, Ackman’s goal is to reduce CP’s operating ratio – an important determinant of efficiency – to 65 percent from 83 percent. Weakened pension plans to save money sparked a strike on Thursday.
Ackman’s presentation on Pacific Railway is available here.
Ackman added just 4,749 shares of Citigroup Inc. (C) at an average price of $33, after selling 4,396 shares the previous quarter at $28. He opened his position in Citigroup in the second quarter of 2010 at an average price of $41.50, and added to it significantly in the second and third quarters of 2011. At the end of the first quarter, he owned 29,124,594 shares, an 11.8 percent weighting in his portfolio.
Citigroup is the only bank that Ackman owns. Citigroup Inc. has some two hundred million customer accounts and does business in more than hundred countries, providing consumers, corporations, governments, and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management.
Citigroup Inc has a market cap of $76.24 billion; its shares were traded at around $26.71 with a P/E ratio of 6.8 and P/S ratio of 1. The dividend yield of Citigroup Inc stocks is 0.2%. In the first quarter of 2012, the bank had $806.7 billion in cash, a record high.
See Bill Ackman’s portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Bill Ackman.