The year is looking bright for Bill Ackman (Trades, Portfolio), CEO of Pershing Square Capital, as most of his portfolio holdings have posted gains for the year, an event not seen since 2014.
Known for his blustery style, Ackman made several noted missteps over the years that cost his hedge fund billions. In 2015, he started a bet on Valeant Pharmaceuticals (VRX, Financial), a rapidly growth drug manufacturer that lost almost 90% of its market cap when it became the target of a short-seller’s report and came under investigation by the Securities and Exchange Commission, the Justice Department and several other agencies. GuruFocus estimates that Ackman lost about 83% of his investment, based on quarterly average stock prices.
Ackman also shorted Herbalife (HLF, Financial), a company that skyrocketed despite his public presentation declaring his short position in it. His investment in Chipotle Mexican Grill (CMG, Financial) declined for a period on reports of food poisoning before rallying this year as one of his turnaround stocks.
The investments led to several down years. Pershing Square declined by 19.3% in 2015, 12.1% in 2016 and 2.6% in 2017. Before the declines, Ackman fared much better, returning 50.6% in 2014.
Positive performance is returning in 2018. For the year through May, Pershing Square returned 4.8%.
Ackman’s solid bets account for the change. His best stock is Chipotle Mexican Grill Inc., which has risen 58% year to date, putting his estimated return around 16%.
The company’s stock rose 24% on April 28, when it reported first-quarter earnings under a new CEO. Chipotle’s revenue increased 7.4% year-over-year to $1.1 billion primarily due to new restaurant openings and menu price increases. Comparable restaurant sales were up 2.2%, with diluted earnings per share increasing 33% to $2.13.
Ackman’s second-best stock, Platform Specialty Products Corp. (PAH, Financial), gained 22.4% year to date, although he still has a total loss on the investment estimated around 41%. The company, which supplies chemicals used in everything from insecticides to circuit boards, plans to split into two businesses by the second half of the year. The Wall Street Journal has reported on June 6 that Platform is in talks to sell its agrochemicals business to Wilmcote Holdings Plc (LSE:WCH) for $3 billion.
Ackman has gained an estimated 30% on his Automatic Data Processing (ADP, Financial) endeavor, after the stock rose 21% this year. His investment in the human resources company got off to a rocky start when he lost a proxy contest with them in 2017. He then reduced the position by 10% in the first quarter after it reported strong earnings and the price increased.
ADP reported an 8% year-over-year boost in revenue to $3.7 billion, with net earnings up 9% to $643 million, beating the company’s expectations. For full-year 2018, ADP said it expects revenue growth of 7-8%, and it raised its diluted earnings per share outlook to between 11-12%.
In a first-quarter shareholder letter from May, Ackman said the company had benefited from “positive developments” including corporate tax reform, rising interest rates and adoption of a required account change.
“In March, ADP announced an Early Retirement Program which should increase recurring earnings by an additional ~$0.25 or more,” Ackman write. “Considered together, these factors should enable ADP to achieve a minimum of ~$6.25+ in EPS by FY 2020, nearly 25% more than the guidance provided by management last September, not including any other initiatives ADP undertakes to improve profitability.”
ADP traded Thursday near an all-time high of $139.82 per share.
