Bill Ackman (Trades, Portfolio) is the founder of Pershing Square and a long-term value investor. The majority of his investments consist of activist campaigns where he will push for change within the company. This in turn will help close the gap between current prices and the intrinsic value of the company. He is a focused investor, normally holding less than 10 positions at any given time. He is very patient and does not mind taking positions in contrarian investments.
Mondelez International (MDLZ, Financial) – (P/E of 8.56, FCF yield of 2.88%, EV/EBIT of 8.52)
The company’s shares are up 16% over the past 12 months and currently trade at $44.50 per share. Mondelez constitutes 13.01% of Ackman's portfolio.
For its most recent fiscal second quarter, Mondelez reported revenue of $6.85 billion, compared to $8.38 billion in the same quarter a year ago. The company has encountered headwinds in the form of currency volatility, as well as bumpiness in the emerging markets. Despite the drop in revenue year-over-year, things look fairly good for the company. Both Ackman and fellow activist investor Nelson Peltz are involved and pushing for operational efficiencies and strategic alternatives.
Also, organic sales growth was up 4.3% because of the bounce in the candy category and pickup in China. Margins are actually continuing to expand with operation efficiencies in the supply chain, budgeting, closing of facilities, and cutting unnecessary expenses.
Shares look appealing at current levels with a P/E of 8.56, FCF yield of 2.88%, EV/EBIT of 8.52 and dividend yield of 1.41%.
Canadian Pacific Railway (CP, Financial) – Forward P/E of 15.97, FCF yield of 3.08%, EV/EBIT of 13.17
The company’s shares are down 30% over the past 12 months and trade at $134.50 per share (near 52-week lows). Canadian Pacific is 14.34% of Ackman's portfolio.
For its most recent fiscal second quarter, Canadian Pacific reported revenue of $1.29 billion, compared to $1.52 billion in the same quarter a year ago. Net earnings were $243 million ($1.54 per share diluted) compared to $363 million ($2.10 per diluted share) in the same periods.
Canadian Pacific recently tried to acquire Norfolk Southern (NSC), which rejected the attempted buyout as shares continue to sink. Margins have continued to expand despite the drop in commodity prices, furthering demonstrating how great the management team is at this company.
The operating ratio actually improved to a record of 59.9% last quarter with a drop in freight demand. The drop in fuel prices was a big contributor to the improved margins, but management is doing a great job of reigning in unnecessary expenses and improving operations. For example, network speed and terminal dwell times improved 19% with locomotive productivity and fuel efficiency both up for the quarter.
Shares look appealing at current levels with a forward P/E of 15.97, FCF yield of 3.08% and EV/EBIT of 13.17.
Platform Specialty Products (PAH, Financial) – Forward P/E of 12.71 and FCF yield of 5.10%
Platform is a global, diversified producer of high-technology specialty chemicals and a provider of technical services. The company’s shares are down 50% over the past 12 months and trade at $12.19 per share (near 52-week lows). Platform Specialty is 3.87% of Ackman's portfolio. For its most recent fiscal second quarter, Platform reported revenue of $597 million, compared to $197 million in the same quarter a year ago. As you can see, the company continues to grow on the top-line.
They recently announced the closing of the acquisition with Alent. As COO, Benjamin Gliklich said, "The acquisition of Alent is another milestone on our path to build a leading, global diversified specialty chemicals company. Alent fits our criteria for 'asset-lite, high-touch' businesses perfectly. This is a great business that we are very excited to bring into the fold."
Shares look appealing at current levels with a forward P/E of 12.71 and FCF yield of 5.10%.
