The 12 positions in Bill Ackman (Trades, Portfolio)’s portfolio at his hedge fund Pershing Square Holdings declined a further 11.1% in 2016, extending his dismal 20% drop last year.
Ackman’s pain worsened in January as even the three positions that ended the year on a positive note – Zoetis (ZTS, Financial), Mondelez (MDLZ, Financial) and Allergan (AGN, Financial) – declined in the new year. Ackman’s losses were led by his second smallest position at 3.9% of his portfolio, Platform Specialty Products Corp. The company’s shares lost 42% of their market value in January alone and closed at $7.01 per share Tuesday, compared to Ackman’s average purchase price of $19 per share.
Platform Specialty Products produces specialty chemical products and provides technical services. Amid fourth-quarter commentary on holdings he expected to rebound, he commented on Platform Specialty Products:
“Our most glaring, albeit small, unforced error was buying additional stock in Platform Specialty Products (NYSE:PAH) at $25 per share to assist the company in financing an acquisition. We paid too much as we assumed the new transaction would create substantial value, and because we assigned too much platform value to the company. Our assessment was incorrect as execution difficulties, operating issues, currency effects, and financing issues have destroyed rather than created value.”
Ackman’s top stock at 25% of his portfolio, drug maker Valeant (VRX, Financial), also slid a further 13%, after its share price plunged when a short-seller targeted the company last year. On Dec. 16, Valeant also lowered its full-year guidance for 2015 to a range between $2.7 billion and $2.8 billion from $3.25 billion to $3.45 billion for revenue. Its EPS was lowered to a range between $2.55 and $2.65 from $4.00 to $4.20.
In spite of the headwinds confronting the company, Ackman believed its underlying value remained intact.
"We have discussed at length the events at Valeant which catalyzed the stock’s initial decline: political attention on drug pricing and the industry, regulatory scrutiny, attacks by short sellers, and the termination of a distribution arrangement representing ~7% of Valeant’s sales,” he wrote in his annual letter. “But, we would never have expected that the cumulative effect of these events would have caused a nearly 70% decline in the stock, nor do we believe that they will permanently impair Valeant’s intrinsic value.”
The single short in Pershing Square’s portfolio, Herbalife (HLF, Financial), was the one position to have positive performance last month. The multi-level marketing wellness company traded almost 14% lower although the Wall Street Journal reported on Jan. 29 that a government investigation into Herbalife and Ackman failed to find any wrongdoing. Ackman did not mention the company in his annual letter but held that it was a “pyramid scheme” in an annual investor presentation Jan. 29, highlighting continued legal action against the company and weaker sales.
According to his investor letter, Ackman had remained confident in the underlying value of most of his holdings as of year-end, though he sold some Mondelez to increase his Valeant position.
“For investments which represent the substantial majority of our capital, our assessment of intrinsic value has remained stable, increased, or declined slightly due to currency and economic weakness in certain sectors, and we update this analysis continually,” he said.
See Ackman’s portfolio here.
