Over the past days hedge funds have been filing their form 13-F, which is a quarterly report of equity holdings filed by institutional investment managers with at least $100 million in equity assets under management, as required by the United States Securities and Exchange Commission (SEC).
Bill Ackman (Trades, Portfolio)´s Pershing Square disclosed an equity portfolio valued at $14.97 billion at the end of the first quarter of 2015. The equity portfolio is mainly invested in Health Care (46%), Materials (31%) and Transports (19%) stocks.
Bill Ackman (Trades, Portfolio) is one of the best long term value investor, and initiated a position in Valeant Pharmaceuticals International (VRX, Financial) to $3.87 billion, according to the fund's latest filing. Valeant Pharmaceuticals is the largest holding in Pershing Square's portfolio, followed by Air Products & Chemicals (APD, Financial) and Canadian Pacific Railway (CP, Financial), representing 20.8% and 17% of the fund's portfolio, respectively.
So, what's going on at Valeant Pharmaceutical that makes it so attractive for Bill Ackman (Trades, Portfolio)?
Among the reasons we can find to justify Ackman´s bullish sentiment, first we could say that Valeant Pharmaceuticals' CEO is J. Michael Pearson, who joined the company in 2008, brought all the experience gained of his 23 years working for McKinsey. Specifically, he gained a lot of experience in acquisitions, integration and corporate strategies. This is extremely important for a company that is characterized by its new strategy of aggressive acquisitions, leaving behind the previous R&D-focused strategy. While improving the firm's margins, Mr. Pearson has guided the company to attractive markets. But this has not been free; he had to make the decision to divest in some assets to get funds to invest in other businesses with good long-term prospects.
After several acquisitions, now Valeant is a leader, and this can be stated because of its large market share of about 20 %. The firm had one of the highest operating margins in the sub-industry, reaching 24.8% as of March 2015.
The company acquired privately held Bausch & Lomb, a leading ophthalmology company, with the aim to reach economies of scale and synergies in this market. It is fair to mention that Novartis (NVS, Financial) or Johnson & Johnson (JNJ, Financial) are strong competitors. However, I believe there will be some opportunities for Valeant in the future simply because it is a market that is experiencing growth.
Going forward, I think that the company will benefit from international operations, in areas such as Latin America or Europe, where demand for health care is growing due to an increased awareness, as well as income too.
Last but not least, the pharma-company has awarded shareholders with share repurchases, at prices below the current price in that moment. Moreover, its prediction models show an EBITDA of $7.5 billion for the next year, enough funds to continue with the share repurchases in the near term.
Other hedge funds managers such as Jim Simons (Trades, Portfolio), John Paulson (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Lou Simpson (Trades, Portfolio) and the funds Diamond Hill Capital (Trades, Portfolio) and Private Capital (Trades, Portfolio) have increased their previous positions in the stock.
Disclosure: Omar Venerio holds no position in any stocks mentioned
