Bill Ackman (Trades, Portfolio)’s Pershing Square returns slumped lower for the third straight month in October as stock prices of most of the holdings in his concentrated portfolio descended.
The slide of the past two years has more than wiped out the 40 percent gain the investor returned for clients in 2014, before trouble began at one of his star stocks, fast-growing Valeant Pharmaceuticals (VRX, Financial), in 2015. Ackman’s downturn is unprecedented in Pershing Square’s history, which from its 2004 inception through the first half of 2014 reported an annualized return of 20.8%, compared to the S&P 500’s 7.7%, with only two losing years.
Valeant was Ackman’s worst-performing stock again in October, falling 17.4%, as it faces investigation by the New York Attorney’s Office that began one year prior over pricing hikes and dubious relationships with specialty pharmacies. Former Valeant CEO Michael Pearson and former CFO Robert Schiller are also being investigated for alleged fraud, and on Oct. 27 ProPublica confirmed that the FTC began an investigation into its purchase of a company that sells rigid contact lenses.
The company, which had achieved rapid growth primarily through acquisitions and price increases on life-saving drugs, saw its stock drop 77.5% over the past year. It closed Wednesday at $21.12 per share, down 11.48% for the trading day. Ackman has a 6.2% stake in the company, controlling 21,591,122 shares, which he purchased at an estimated average of $156 per share.
Following behind Valeant was Platform Specialty Products Corp. (PAH, Financial), a technology chemicals and agriculture company, fell 9.7% for the month, extending its year-to-date slide to 42.75%. Noting the company’s mixed second-quarter results, with revenue up 1% including a 40% drop in North America and EBITDA down nearly 6%, Ackman expressed confidence in its new leader who began in December in his mid-year letter.
“We are starting to see business progress under Platform's new CEO Rakesh Sachdev,” he wrote. “We think highly of Rakesh and believe he possesses the necessary leadership qualities and experience to improve the performance of Platform.”
Ackman owned 18.6% of the company, encapsulated in 42,737,394 shares at the end of the second quarter, making it one of his second-smallest long position at 5.05% of his portfolio. His estimated average price was $19 per share, while the stock closed Wednesday at $7.35 per share.
Ackman can celebrate the stock in his portfolio that did increase, his smallest position Nomad Foods Ltd. (NOMD, Financial). He has 33,333,334 shares of the company, an 18.3% stake that represents 3.54% of his portfolio.
Nomad produces frozen food sold in Europe. For the second quarter the company’s revenue fell 6.6% to 455.9 million euros, primarily due to weakness in its three largest markets, the U.K., Italy and Germany. It had a 12% increase in profit to 35.4 million euros, or 5.6% increase in euros per share to 19 euro cents.
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