Billionaire Bill Ackman’s Pershing Square Bought Mondelez International Inc (MDLZ) During Q1 2013

Consumer stocks. Adding Mondelez International Inc (NASDAQ:MDLZ) to his portfolio only further increases Ackman’s emphasis on consumer stocks in his long portfolio. His second and third largest holdings, respectively, are The Procter & Gamble Company (NYSE:PG) and General Growth Properties Inc (NYSE:GGP), with other names including Beam and Burger King. Procter & Gamble is a classic defensive stock, with a beta of 0.3 and a dividend yield of 3% at current prices, though the hunt for stocks meeting this criteria has resulted in it carrying earnings multiples in the high teens despite its business (similarly to that of Mondelez) not showing much growth potential. General Growth, which is a retail-focused real estate investment trust, pays a fairly low yield for a REIT at 2.1% (real estate investment trusts receive favorable tax treatment conditional on distributing a large share of taxable income to shareholders, often resulting in high yields). Note that while Pershing Square likes a large number of consumer stocks, it’s not necessarily a reflection of bullishness- many of these companies are consumer staples.

We do find Pershing Square’s focus on consumer stocks relative to, say, financials or tech companies worth noting. However, we’re not sure that General Growth, Procter & Gamble, or Mondelez International Inc (NASDAQ:MDLZ) are actually good values at this time; it is true that buying Mondelez would result in upside in the event of a merger but that seems like too speculative a move for us. As for Matson (which, as a container ship company, could also be read as tied to consumer demand), it’s probably best to wait for another quarter or two of results to see how earnings numbers unfold, as the current rate of revenue growth doesn’t seem high enough to justify the current valuation.

Disclosure: I own no shares of any stocks mentioned in this article.