Bill Ackman‘s Pershing Square is well-known for holding a concentrated equity portfolio with a few, but rather large, positions. One of the 140 Biggest and Most Famous Activist Hedge Funds in the world, Pershing Square usually accumulates a large stake in a company and then gets involved in reshaping it, in this way creating catalysts that stimulate growth. Even though this approach made Ackman one of the most successful and most followed activists on Wall Street a couple of years ago, recently Ackman’s fund has registered a reversal following substantial losses, the most noteworthy of which were from its bet on Valeant Pharmaceuticals and short position in Herbalife. According to Pershing’s third-quarter letter to investors released in December, Pershing Square Holdings, Ltd. lost 13.5%, net of fees, in the first 11 months of 2016 after having lost over 16% in 2015.
In the latest round of 13F filings, Pershing Square reported a 13F portfolio worth $5.91 billion as of the end of December, versus $5.41 billion a quarter earlier. The portfolio didn’t contain many changes, as the fund didn’t initiate any positions, and sold off just one holding. In addition, Pershing boosted its exposure to one company, but reduced its stakes in three other stocks. In this article, we are going to take a closer look at some of the holdings in Pershing’s 13F portfolio.
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Pershing’s stake in Restaurant Brands International Inc (NYSE:QSR) remained its top holding heading into 2017, as the fund left the position unchanged at 39.15 million shares, while their value advanced to $1.87 billion from some $1.75 billion reported as of the end of September. Pershing has held shares of the company that was formed following the merger of Burger King and Tim Hortons since it started trading in December 2014 (it was a shareholder of Burger King) and has seen the stock appreciate by nearly 60% since then. In the last several quarters, Restaurant Brands International Inc (NYSE:QSR) managed to post better-than-expected EPS, while its revenue missed expectations by a narrow margin in several quarters. In its third-quarter letter to investors, Pershing Square praised the company’s financial results as well as its managers’ work at improving Tim Hortons’ cost structure. Another shareholder of Restaurant Brands International Inc (NYSE:QSR) is billionaire Warren Buffett’s Berkshire Hathaway, which held 8.44 million shares at the end of 2016.
After having initiated a $230 million stake in Chipotle Mexican Grill, Inc. (NYSE:CMG) during the third quarter, Pershing Square boosted it by over 400% in the following three months, reporting ownership of 2.88 million shares worth $1.09 billion as of the end of 2016. In the aforementioned investor letter, the fund said that it had been following the company for years, but the decision to get into the company was made after Chipotle’s stock fell following food safety issues. Chipotle Mexican Grill, Inc. (NYSE:CMG)’s stock lost 15% last year, including a 12% decline registered in the fourth quarter. Following those food safety issues, Chipotle struggled with weak sales, but last month it posted a 14.7% jump in same-restaurant sales in December, versus a 30% drop a year earlier. Nevertheless, for the fourth quarter, Chipotle posted EPS of $0.55, lower than the estimates of $0.57, while revenue of $1 billion missed expectations by $40 million. Chipotle also has big plans to win back customers this year, which includes more advertising and promotion of online ordering. David Blood and Al Gore’s Generation Investment Management reported ownership of some 568,300 shares of Chipotle Mexican Grill, Inc. (NYSE:CMG) in its latest 13F filing.
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We’ll check out three more of Ackman’s fourth-quarter moves on the next page.