Billionaire Bill Ackman’s Top Stock Picks for 2013

Consumer goods. Pershing Square’s retail stocks weren’t its only exposure to consumer spending: the fund also owned about 28 million shares of The Procter & Gamble Company (NYSE:PG) and over 20 million shares of Beam Inc (NYSE:BEAM). Beam is a growth stock, with double-digit percentage increases in both revenue and earnings in the fourth quarter of 2012 versus a year earlier. However, at a trailing P/E of 26 a good deal of future growth is already priced into the current price. Giant Procter & Gamble’s market capitalization of over $200 billion places its valuation at 17 times trailing earnings. While a personal products company of its size might not be a particularly good pure value stock at that pricing, Procter & Gamble does offer some defensive characteristics including a beta of only 0.3 and a dividend yield of almost 3%.

Ackman’s retail picks don’t look particularly interesting to us; we think that we would avoid both. Procter & Gamble also looks too expensive unless an investor’s portfolio is in need of some downside protection. That leaves Canadian Pacific- which at this point looks like it is better placed on a watch list until it becomes more clear that the company is going to perform well going forward- and Beam; that company might grow enough to merit a higher valuation but we would be cautious of recommending it without being more persuaded that the business will beat market expectations.

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