Bill Ackman, the billionaire manager of Pershing Square, has been in the news quite a bit in the last several months thanks to his public statements about his large short position in Herbalife. In December he accused the company of being a pyramid scheme; fellow billionaire and longtime Ackman rival Carl Icahn (see Icahn’s stock picks) began buying the stock after it fell in price, and slugged it out with Ackman himself on CNBC (though the angry conversation focused on their history rather than the merits of Herbalife as an investment). We track hundreds of quarterly 13F filings from hedge funds and other notable investors as part of our work developing investment strategies (we have found, for example, that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year). We have gone through Ackman’s most recent filing compared to what Pershing Square has previously reported owning and here are three things which we noticed:
Mondelez. Pershing Square was buying Mondelez International Inc (NASDAQ:MDLZ) during the first quarter of 2013 and owned about 6 million shares at the end of March. Mondelez International Inc (NASDAQ:MDLZ) was formed from the breakup of Kraft, with the North American grocery business currently operating under the name Kraft Foods Group. The company’s financial statements have shown that it trades at 20 times trailing earnings, and given the stability of its business that does seem a bit high from a value perspective (though 20 is about where many other large food stocks are trading). There has been some speculation that Mondelez International Inc (NASDAQ:MDLZ) could merge with giant beverage and snack foods company Pepsico, though buying a stock primarily based on rumors such as these is likely not a smart move.
Selling Matson. The fund reported owning a little over 3 million shares of $1.1 billion market cap shipping company Matson (NYSE:MATX), down slightly from the beginning of 2013. Matson, which was formerly known as Alexander & Baldwin Holdings Inc (NYSE:MATX), primarily operates container ships, experienced an 8% rise in revenue last quarter compared to the first quarter of 2012. Earnings more than doubled, but obviously it’s not sustainable for net income to continue increasing at a much faster rate than the top line. The market is pricing in growth going forward, with a trailing P/E of 21, and Wall Street analysts are at least forecasting that earnings per share will indeed increase significantly over the next couple of years.