Pershing Square, the activist hedge fund founded and managed by Bill Ackman “has built up a 12.2 per cent stake in Canadian Pacific Railway, one of Canada’s most storied companies,” reports the Financial Times.
Bill Ackman Sees CP Rail as a Good Investment
Bill Ackman sees the shares as undervalued, write the Financial Times. “Pershing said in a regulatory filing that CP Rail shares are undervalued and an attractive investment, and that it expected ‘to engage in discussions’ with the Calgary-based company about a wide swath of its business.” CP Rail, which “is the sixth biggest by revenue of the seven North American Class 1 railway companies” is valued similarly to its peer but is less profitable. “CP Rail has an operating ratio – a measure of operating costs as a proportion of sales – of 76 per cent, versus 59 per cent for Canadian National Railway. Its third-quarter profit of C$186.3m, or C$1.10 a share, was below analysts’ expectations and C$10.5m lower than a year earlier.”
What Bill Ackman Touches Turns to Gold
Bill Ackman’s Pershing Square is an activist hedge fund, meaning that it takes large stakes in companies in which it sees a lot of potential. Then, it helps the company become more profitable, either by restructuring in some way or pushing board members to make big changes. For instance, Ackman took an activist position in department store JC Penney earlier this year, where he worked to get ex-Apple exec Ron Johnson appointed as the company’s CEO and for a general change of management. As such, CP Rail, which has underperformed its North American rivals including its main domestic competitor Canadian National Railway, jumped 6.8% in late trading Friday on the news of Ackman’s involvement.