Bill Ackman (Trades, Portfolio) reported Wednesday that he made only one new buy, Nike Inc., and increased his holding of Mondelez International Inc. (MDLZ, Financial) in the fourth quarter.
The leader of the hedge fund Pershing Square acquired 5,836,020 Nike shares, which had a fourth-quarter average price of $57. The price has since gained 18% as of Wednesday evening.
The holding represents 6.2% of his portfolio, which makes it his smallest position, below Platform Specialty Products (PAH, Financial). Ackman did not have to report the holding during the quarter because he purchased 0.36% of Nike’s shares, under the 5% of shares an investor must own to trigger a disclosure. As an activist investor, typically Ackman takes sizable stakes in large companies as leverage to push for change.
The disclosure contributed to a 3.27% pop in Nike’s share price Wednesday, which closed the day at $67.96 per share, near a 10-year high.
Over the past five years, Nike has exhibited 10.4% annualized revenue growth, 12.3% EBITDA growth and 6.2% book value growth. Over the same period, its stock price rose 138%.
The athletic company looks relatively pricey by its price-sales ratio, which hit 3.18, near a two-year high.
Ackman also increased his holding of Mondelez International, a snack food company, in the fourth quarter by 66.98%, purchasing 9,328,299 additional shares. To end the quarter, he had amassed 23,256,402 shares, raising the position to third from fourth place in his portfolio.
Ackman said of the company in a third-quarter letter: “We believe that Mondelez (NASDAQ:MDLZ) is currently substantially undervalued given its high business quality, long-term secular growth potential – especially in emerging markets – and substantial opportunity to improve profit margins. Today, Mondelez trades at 17 times our estimate for 2018 earnings per share, a discount to the S&P 500 market multiple, for a business whose attributes are substantially better than the average company in the S&P 500.”
Mondelez has a $65.2 billion market cap. It has seen decline rates of 3.8% for revenue, 10.4% for free cash flow and 0.2% for book value in the past five years. EBITDA grew at a rate of 1.7% over the same period.
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