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An In-Depth Look at Billionaire Bill Ackman’s Concentrated Equity Portfolio

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Renowned activist investor Bill Ackman has been removed from the list of 20 best-performing hedge fund managers in history, after his fund Pershing Square Capital Management L.P. suffered its “greatest peak-to-through decline and worst annual performance ever” in 2015. The concentrated, research-intensive, fundamental value investor lost 20.5% net of all fees last year, after scoring a 40% gain in the previous year. Our own metric pegged his stock picks’ losses at 21.7% for the year, based on the weighted average returns of his long positions in stocks with at least a $1 billion market cap, based on the size of those positions at the beginning of each quarter.

While 2015 is a year the billionaire investor would like to forget and had surely hoped to put behind him, his fund is not doing all that great in 2016 either. Nonetheless, Bill Ackman has already proven that he can generate exceptional returns for investors and he will most likely prove it again in the upcoming years. As already mentioned, Ackman holds a relatively concentrated portfolio consisting of only eight long positions, one of which significantly weighed on his fund’s performance last year. The value of the equity portfolio overseen by Pershing Square dropped to $12.46 billion from $13.95 billion in the final quarter of 2015, during which time the activist reduced his exposure to only one company. With that in mind, the following article will discuss Ackman’s top equity holdings at the end of 2015 and the performance of the companies in question.

Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).

Bill Ackman
Bill Ackman
Pershing Square

Let’s start off our discussion with Valeant Pharmaceuticals Intl Inc. (NYSE:VRX), which was the worst performer within Bill Ackman’s portfolio last year. Pershing Square trimmed its stake in the beleaguered drug company by 2.88 million shares during the fourth quarter, ending the year with 16.58 million units of common stock, with a portion of the stake in Valeant being sold for tax reasons. According to a newly-amended 13D filing, Ackman currently owns 30.71 million shares of Valeant Pharmaceuticals Intl Inc. (NYSE:VRX), which include 21.59 million shares of common stock and 9.12 shares underlying call options. The shares of the specialty pharmaceutical and medical device company are down by 48% over the past 12 months due to amplified political attention on drug pricing, regulatory scrutiny, criticism and attacks from short sellers, and the interruption of an important distribution arrangement. Nonetheless, the billionaire investor does not believe that the aforementioned headwinds “will permanently impair Valeant’s intrinsic value”. Andreas Halvorsen’s Viking Global increased its exposure to Valeant Pharmaceuticals Intl Inc. (NYSE:VRX) during the December quarter by 2.80 million shares to 7.79 million shares.

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