Bill Ackman Defends Another Down Year For Pershing Square

Pershing Square founder and CEO Bill Ackman updated the hedge fund's investors Monday after yet another difficult year.

Despite a 20-percent gain for the S&P 500 in 2017, Pershing reported a net loss of 4 percent on the year. Pershing has struggled the past two years as well, reporting a 13.5-percent net loss in 2016 and a 20.5-percent net loss in 2015.

Ackman said he is undeterred by the fund’s recent struggles and is optimistic about his core holdings.

“We believe now is a uniquely attractive time to be an investor in Pershing Square,” he said. 

Here’s a rundown of what Ackman said about each of Pershing’s top investments:

• Automatic Data Processing ADP is extremely attractive from a cash flow perspective. “We remain actively engaged at ADP; achieving ADP’s structural potential will drive substantial shareholder value,” Ackman said. 
• Restaurant Brands International Inc QSR still has upside remaining even after gaining more than 300 percent from Pershing’s original 2012 purchase price. “QSR remains an attractive investment opportunity despite significant share price appreciation in 2017,” he said.
• Mondelez International Inc MDLZ will benefit from a one-two punch of double-digit earnings growth and market re-rating. “We believe there are clear catalysts for an upward revaluation of MDLZ as key investor concerns that emerged last year are addressed,” the CEO said. 
• Pershing Square Holdings sold its common stock in Howard Hughes Corp HHC but maintained its long position via total return swaps. Pershing Square Capital Managament continues to hold common shares. “HHC continues to create value across its portfolio of core trophy real estate assets,” Ackman said.
• The new Chipotle Mexican Grill, Inc. CMG CEO will have an excellent opportunity given the company’s digital presence, innovative menu and international growth opportunities, Ackman said: “We believe Chipotle represents a highly attractive turnaround opportunity." 
• Ackman said the case for Federal National Mortgage Association FNMA and Federal Home Loan Mortgage Corp FMCC hinges on housing finance reform. “If housing finance reform is successful, we believe Fannie and Freddie will be worth multiples of their current share prices." 
• Platform Specialty Products Corp PAH is a major value play, he said. “Based on analyst estimates for 2018 EBITDA, PAH shares would be valued at more than $19, nearly 75 percent above current levels, if it traded at current peer multiples." 
• Nike Inc NKE has an opportunity to expand margins via manufacturing updates and distribution channel growth, the CEO said. “NIKE is a high quality business that should compound long-term earnings at a high rate due to strong revenue growth and margin expansion." 
• Ackman has converted his famous Herbalife Ltd. HLF short position into an in-the-money put position, and is optimistic the bet will still pay off in time.

“Herbalife’s financial performance has deteriorated significantly in recent years,” he said.

Related Links:

A Closer Look At Pershing Square's Shareholder Letter: ADP, Chipotle, And More

Bill Ackman Sticks With Chipotle Despite 33% Decline In Shares