As an activist, Bill Ackman prefers to hold a concentrated equity portfolio that allows him to focus on his targets and work towards maximizing their shareholder value. Over the long-run, activists generate higher returns than their passive peers, which makes them the best investors to emulate. Last year, Ackman’s Pershing Square produced gains of around 40%, topping the list of the best-performing hedge funds. This year, the fund has been less successful, plunging by around 12% in the first ten months of the year on the back of its position in Valeant Pharmaceuticals Intl Inc (NYSE:VRX), which amasses a quarter of its equity portfolio, and whose stock has lost 50% since the beginning of the year. Another one of Ackman’s top picks, Canadian Pacific Railway Limited (USA) (NYSE:CP), has plunged by 28%. Overall, Pershing’s top five holdings amassed over 83% of the fund’s equity portfolio, which was valued at $13.95 billion at the end of September. Let’s take a closer look at these companies.
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Pershing Square’s stake in Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has put a lot of pressure on its returns in the last couple of months. The stock has lost over 60% since the beginning of July as investors started questioning some of the company’s practices on the back of concerns related to drug-pricing and distribution policies. Pershing owns 19.47 million shares of Valeant Pharmaceuticals Intl Inc (NYSE:VRX) worth $3.47 billion as of the end of the third quarter. The number of shares remained unchanged, but their aggregate value slid from $4.33 billion reported as of the end of June. Jeff Ubben’s ValueAct also owns a substantial stake in Valeant Pharmaceuticals Intl Inc (NYSE:VRX), which contains 14.99 million shares as of September 30.
In Air Products & Chemicals, Inc. (NYSE:APD), Ackman also left his position unchanged at 20.55 million shares, worth $2.62 billion. Holding almost 10% of the company, Pershing Square is the largest shareholder of Air Products & Chemicals. In September, Air Products announced plans to spin-off its materials technologies business into a separate publicly-traded company. Ackman had previously tried to pursue the company to separate some of its businesses. Air Products & Chemicals, Inc. (NYSE:APD)’s stock has inched up by 2% so far this year, but it is over 70% in the green over the last three years. Another investor bullish on Air Products & Chemicals, Inc. (NYSE:APD) is Andreas Halvorsen‘s Viking Global, which owns 5.92 million shares according to its third quarter 13F filing.
As mentioned, Canadian Pacific Railway Limited (USA) (NYSE:CP)‘s stock has also affected Pershing’s returns, dropping by more than 28% so far this year amid a decline in demand for railway transportation on the back of weak oil and commodity prices. Canadian Pacific is another one of Ackman’s long-term bets. Back in May 2012, the investor won a proxy vote and managed to reshuffle the company’s portfolio. Since then, the stock has surged by more than 80%. At a forward P/E of 15.6, Canadian Pacific Railway Limited (USA) (NYSE:CP)’s stock is in line with the S&P 500, but analysts see more potential for the stock, as they currently have a consensus price target of $208.60 per share on it. Daniel S. Och‘s OZ Management is another shareholder of Canadian Pacific Railway Limited (USA) (NYSE:CP), holding 3.80 million shares.