Pershing Square fund manager Bill Ackman (Trades, Portfolio) disclosed on Monday that he trimmed 46.80% of his position in Automatic Data Processing Inc. (ADP, Financial) according to GuruFocus Real-Time Picks.
Ackman sold 3,716,592 shares for $136.63 per share, trimming his position to 4,225,365 shares.
Guru commits to investment despite slimming stake
Ackman said in his June 19 shareholder letter that Pershing Square disclosed its investment in Automatic Data Processing in August 2017. The company’s share price increased from approximately $105 to $139 over the past 10 months, representing a 32.38% price increase.
The Pershing Square fund manager said even though the firm reduced its ADP position “in light of [the position’s] increased size,” Pershing Square expects to remain “a large, long-term and engaged shareholder” of ADP.
Guru discusses company’s strong earnings guidance in shareholder letter
Ackman mentioned that ADP provided “substantial increases” to the company’s earnings guidance during ADP’s investor day on June 12, including revenue growth between 7% and 9% and pretax operating margins between 23% and 25% by fiscal 2021. The projections imply a three-year CAGR of earnings between 16% and 19%, with a fiscal-2021 earnings target approximately $3 higher than ADP’s earnings at the time of investment according to Ackman.
GuruFocus ranks ADP’s business predictability 4.5 stars out of 5 as the company has consistent revenue and earnings growth. The company’s profitability ranks 8 out of 10 driven on several factors, including expanding operating margins and returns on equity that outperform 94% of global competitors.
Disclosure: no positions.
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