Ackman Conference Call Updates Several Key Positions, Claims Herbalife (HLF) Endgame is Near

Pershing Square Capital Management is a New York-based hedge fund managed by billionaire investor Bill Ackman. In its third-quarter conference call, Pershing said that 2016 has been a bad year for the fund, mainly due to the losses registered by Valeant. The call said that Bill Ackman was “not happy” with Trump and Clinton running for the Presidency, and that he had urged Michael Bloomberg to run. The call also talked about Pershing’s positions in Chipotle Mexican Grill, Inc. (NYSE:CMG), Valeant Pharmaceuticals Intl Inc (NYSE:VRX), Herbalife Ltd. (NYSE:HLF), Zoetis Inc (NYSE:ZTS), and Restaurant Brands International Inc (NYSE:QSR). We’ll talk a look at his comments on these companies in this article.

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Chipotle Will Recover from Crisis

Pershing Square thinks that even though food safety issues dented the reputation of Chipotle Mexican Grill, Inc. (NYSE:CMG), the company will recover from the crisis. The fund said Chipotle has successfully implemented food safety controls, though its sales still lag. The fund thinks the Mexican grill has a “great” culture, brand and economic model. Pershing added that Chipotle “disrupted” the food industry in the US, and is still one of the best large-scale food brands in the country. However, the fund warned that Chipotle’s recovery will not be smooth or predictable. Ackman’s firm said that it has noted a recovery of sales based on its research of about 5,000 Chipotle restaurants. Pershing said it has a “constructive relationship” with the company’s management, and that its activist position should not be taken as a hostile engagement. Pershing Square recently surprised the Street by taking a 2.88 million-share stake in Chipotle Mexican Grill, Inc. (NYSE:CMG). The aggregate value of the stake stood at about $1.2 billion when first reported and accounted for 9.9% of the company’s total float. It was reported in the media that Chipotle turned to experts, including those from Goldman Sachs and Morgan Stanley, to fend off any hostile moves from Ackman’s fund.

Valeant in Shambles

Pershing’s third quarter conference call also talked about Valeant Pharmaceuticals Intl Inc (NYSE:VRX), whose stock has lost over 82% so far this year. Pershing thinks the stock tanked mainly due to the criminal prosecution that was opened against it regarding its alleged connivance with Philidor Rx Services to increase drug sales. Pershing said Valeant is “trying” to be transparent. The fund thinks Valeant’s revenue is declining due to tough competition and expenses. Last week Valeant reported third-quarter earnings of a loss of $1.22 billion, or $3.49 per share, while revenue for the period declined by 11% year-over-year to $2.48 billion, missing the consensus estimate of $2.52 billion. Bill Ackman has a 4% position in Valeant.

On the next page, we will take a look at Pershing Square’s comments on three other stocks.

Endgame of Herbalife is Nearing

Pershing said the endgame of Herbalife Ltd. (NYSE:HLF) is in sight. The fund thinks the departure of Herbalife’s CEO Michael Johnson is an extremely important development, as it has shook customer confidence. Bill Ackman has had a $1 billion short on Herbalife since 2012. He claims that Herbalife is a pyramid scheme that will soon collapse. There has been a bitter strife between Ackman and billionaire Carl Icahn on the issue of Herbalife, as Icahn thinks Ackman is “dead wrong” about the company. HBO’s John Oliver recently criticized Herbalife as well, which could be an important development according to Pershing.

Pershing Sells Zoetis

Pershing now has no stake in Zoetis Inc (NYSE:ZTS), selling off its remaining 2.72 million shares (as of September 30) of the company in the fourth quarter, though Pershing believes that Zoetis is a business which is “great” and has no element of aggressive politics. At the end of the second quarter, Bill Ackman’s hedge fund had a $1 billion stake in the New Jersey-based pets and livestock medicine company. The stock is up by over 2% so far this year.

Restaurant Brands Problems in the US

Pershing Square now has a 15% stake in Restaurant Brands International Inc (NYSE:QSR). The fund thinks that the Canadian Food chain is facing headwinds in the US, as Burger King struggles amid weakness in the restaurant industry. While restaurants in the U.S are facing problems amid cheap grocery store food items and minimum-wage increases, Pershing noted that Tim Hortons continues to perform well in Canada. Restaurant Brands reported third-quarter revenue of $1.07 billion, up from $1.01 billion in the same quarter of the previous year.

Disclosure: None