William “Bill” Ackman, CEO of Pershing Square Capital Management, holds a concentrated portfolio of only 10 stocks, one of them new, and a total value of $10.95 billion. The fund’s quarter-over-quarter turnover is 8%.
Here’s a look at Ackman’s high-impact reduction of a railway that was formed as Canada’s lifeline, uniting the provinces of the vast country. In 1867, Canada's confederation joined far-flung provinces to form a new country with the promise of this railway.
Canadian Pacific Railway Ltd. (CP): Reduced
Impacts Portfolio: -9.16%
Current Shares: 17,159,888
Up 56% over 12 months, Canadian Pacific Railway Ltd. has a market cap of $25.12 billion; its shares with a P/E ratio of 35.80 and a P/B of 4.50. The dividend yield is 0.95%.
Incorporated in 1881, Canadian Pacific Railway Ltd. provides freight transportation services, logistics solutions, and supply chain expertise in Canada and the United States. The company’s rail network is spread across an area of 14,400 miles, serving the principal business centers of Canada from Montreal, Quebec, to Vancouver, British Columbia, and the U.S. Northeast and Midwest regions. The company transports bulk commodities, including grain, coal, sulphur, and fertilizers; and merchandise freight, such as finished vehicles and automotive parts. The railway also transports forest products, industrial and consumer products, and a variety of other products and raw materials.
The company reported financial results for the third quarter of 2013, with a hike in net income of 45%, at $324 million. Quarterly revenue was $1.5 billion, marking the highest revenue quarter in the history of the company, and representing a 6% increase in revenue year-over-year. Canadian Pacific’s adjusted net income was also up 48% at $331 million for the third quarter of 2013. Record quarterly earnings of $1.88 (adjusted EPS) also rose 45% year-over-year. In the first nine months of 2013, the company’s balance sheet shows free cash of$318 million, compared to $21 million in the same period of last year.
Canadian Pacific Railway’s CEO, E. Hunter Harrison commented on his company’s performance in a company press release: “By all standards, this was an outstanding quarter. The company's focus on service execution while controlling costs is a testament to our team of dedicated, hardworking railroaders. What we have proven this quarter is the ability to drive earnings growth and lower our operating ratio, even in a softer volume environment. That's the power of the CP plan.”
Guru Action: As of Oct. 24, 2013, Bill Ackman reduced his position by 28.97%, selling shares in the average price range of $141.72. The current price is $143.37, with a change from average up 1%.
Ackman’s highest gain with CP was 150.3% when he made a new buy of 4,040,235 shares at an average price of $57.28 in the third quarter of 2011. He held for four quarters and averaged a gain of 143% on 24,159,888 shares bought at an average price of $59.06 per share.
Track historical pricing, revenue and net income:
Numerous gurus hold CP and there is active insider trading.
Activist investor Bill Ackman formed Pershing Square Capital Management in November 2003.
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