Bill Ackman (Trades, Portfolio)'s Pershing Square is a $13.9 billion hedge fund. It's important to analyze key holdings from prominent value-oriented hedge funds because hedge funds have more analytical resources to analyze stocks than the majority of individual investors. The following are some of Pershing's most interesting stock selections.
Top position - Valeant Pharmaceuticals International Inc. (VRX, Financial)
Pershing Square holds 24.9% of its portfolio in Valeant Pharmaceuticals. Here is a snapshot of the company's recent quarterly performance.
As we can see in the table, in the third quarter, Valeant reported EPS growth of 30% year over year and revenue growth of 36% year over year. In the previous two quarters, the company had reported EPS growth at 34% each quarter, while revenues grew at 34% and then 16%. It is essential to look for companies with solid growth in both EPS and sales, because that is what ultimately drives the shares.
Another important aspect to take a look is the level of annual EPS growth.
Valeant Pharmaceuticals generated 34% growth in EPS in FY2014 and the consensus analyst expectation is 34% growth in 2015 and 30% in 2016.
Earnings surprises
One important aspect in analyzing stocks is evaluating the level of surprises in the past, and most importantly in the last reported quarter. In the last quarter, Valeant reported EPS of $2.74 compared to consensus expectations of $2.70 per share. This is a 4 cent difference and is a good element to see in the stock. In the past three quarters, Valeant surprised analyst consensus estimates by 4.07%, 0.85% and 1.18%.
Second position - Air Products & Chemicals Inc. (APD, Financial)
Pershing Square holds 18.79% of its portfolio in Air Products & Chemicals. Here is a snapshot of Air Products' recent quarterly performance.
In the third quarter, Air Products reported EPS growth of 10% and revenue decline of 9% year over year. In the previous two quarters, the company had reported EPS growth of 13% and 17%, while revenues declined 6% each quarter.Â
The company's annual EPS growth is shown below.
Air Products generated 14% growth in EPS in FY2015 and consensus analyst expectation is 12% growth in 2016 and 11% in 2017.
Earnings surprises
In the last quarter, Air Products reported EPS of $1.82 compared to consensus expectations of $1.80 per share.Â
Third position - Canadian Pacific Railway Ltd. (CP, Financial)
Pershing Square holds 14.35% of its portfolio in Canadian Pacific Railway. Here is a snapshot of Canadian's recent quarterly performance.
In the third quarter, Canadian reported EPS growth of 16% and revenue growth of 2% year over year. In the previous two quarters, the company had reported EPS growth of 16% and 59%.
The annual EPS growth is shown below.
Canadian Pacific Railway generated 32% growth in EPS in FY2014 and the consensus analyst expectation is 11% decline in 2015 and 15% growth in 2016.
Earnings surprises
In the last quarter, Canadian Pacific reported EPS of $2.69 compared to consensus expectations of $2.67 per share.Â
