Bill Ackman of Pershing Square recently did an interview with Andrew Ross Sorkin at the DealBook conference in New York and Insider Monkey was there to cover it. Below are some of the noteworthy highlights from the interview, especially as they related to Valeant Pharmaceuticals Intl Inc (NYSE:VRX), Chipotle Mexican Grill, Inc. (NYSE:CMG), Herbalife Ltd. (NYSE:HLF), and Mondelez International Inc (NASDAQ:MDLZ).
Hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor to beat the S&P 500 by around 95 basis points per month (see the details).
First, Bill Ackman is extremely bullish on the Trump Presidency. Ackman said:
“I woke up extremely bullish on Trump.. United States is the greatest business in the world, and it has been under-managed for a very long period of time. We now have a businessman as President.. He’s going to launch a major construction program.. he’s going to get a lot done.”
By getting things done, Ackman thinks Trump will increase the growth rate in the U.S. In addition, Ackman expects corporate taxes to fall under the Trump administration, an action that will likely increase net income margins across the board.
While he admits that the investment was a mistake, Ackman sees a path forward for Pershing’s Valeant Pharmaceuticals Intl Inc (NYSE:VRX) position. Specifically, Ackman believes Valeant will sell its non-core assets, fix its operations, and that its management will probably at rename the company at some point. Ackman is confident in CEO Joseph Papa, and believes he will do a good job in unlocking value. With the political climate in Washington set to change, there is potential for Ackman’s investment to rebound if the company executes. Pershing Square was long more than 21 million shares of Valeant Pharmaceuticals Intl Inc (NYSE:VRX) at the end of the second quarter.
On Chipotle Mexican Grill, Inc. (NYSE:CMG), which Pershing Square owns around 10% of, Ackman calls the burrito chain “a great company and a great brand”, which made a mistake that caused customers and shareholders to lose faith in the company. Ackman notes that Pershing has done well in the fast food sector in the past with investments in Wendy’s and McDonalds. It’s a space Pershing knows very well. Given that its business is simple and predictable, Ackman thinks Chipotle Mexican Grill, Inc. (NYSE:CMG)’s problems are fixable once people move on from the food safety issues of last year.
On the next page we’ll see what Ackman had to say about Herbalife and Mondelez.