Bill Ackman and Scott Ferguson Are Investing In The Same Stocks

At first glance, it doesn’t seem like fund managers Bill Ackman and Scott Ferguson are all that much alike. Except for the obvious facts that they are both Harvard graduates and both run billion-dollar hedge funds based in the Big Apple, the apparent similarities are few. However, when one takes a closer look, one can find a bunch of similarities between the mentor and his pupil, oh yes! Ferguson was the first man employed by Bill Ackman at his Pershing Square Capital Management LP, well before Ferguson left to spread his own wings with his own fund Sachem Head Capital Management. So let us take a closer look at the two hedge fund managers and find out what else they have in common, particularly when it comes to their stock picks. But first things first, Pershing Square Capital Management LP was founded in 2004 and keeps assets under management (AUM) of roughly $18.0 billion and a public equity portfolio of $14.97 billion. According to his latest 13F filing for the March 31 reporting period, Ackman’s public equity portfolio was nearly entirely devoted to three sectors: healthcare, materials, and transports. The much smaller Sachem Head Capital Management LP manages a public equity portfolio of $1.51 billion invested 78% in healthcare. So, did they have any picks in common? Indeed they did, and unsurprisingly, two of the biggest are in healthcare, in which both money managers are the most heavily invested. Let’s take a look at those stocks in this article, which are Zoetis Inc (NYSE:ZTS), Air Products & Chemicals, Inc. (NYSE:APD) and Allergan PLC (NYSE:AGN).

Why are we interested in the 13F filings of a select group of hedge funds? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole; yet investors have been stuck (until now) investing in all of a hedge fund’s stocks: the good, the bad, and the ugly. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic the best ideas of the best fund managers on your own? These top small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Even better, since the beginning of forward testing at the end of August 2012, the strategy worked just as our research predicted and then some, outperforming the market every year and returning 142% over the last 33 months, which is more than 84 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).

Pharmaceutical company and former Pfizer Inc. (NYSE:PFE) subsidiary Zoetis Inc (NYSE:ZTS) has won the attention of the two hedge fund managers. Bill Ackman increased his stake by 1% to 41.82 million shares, while Scott Ferguson left his stake of 4.40 million shares untouched during the quarter. Zoetis Inc has so far during the spring been a wise pick, having increased by 17.3% on the exchange year-to-date and is also up by an impressive 55.5% during the last year. Zoetis Inc (NYSE:ZTS), founded in 1952, beat analysts’ expectations for the first quarter, posting earnings per share of $0.41 which was $0.04 above the estimates. Furthermore, the producer of drugs for pets and livestock announced earlier this year that it would now strive to increase its resource allocation and efficiency. A first step in that process is apparently the announcement that Zoetis Inc will cut 165 jobs at its headquarters during this year and next. It seems to us like John Segrich and Michael Molnar from Lorem Ipsum Management also don’t want to miss out on the opportunity in this stock, since they took a stake in Zoetis Inc (NYSE:ZTS) of 180,000 shares during the first quarter.

Air Products & Chemicals, Inc. (NYSE:APD) was another stock in which the  two fund managers found common ground. Neither Bill Ackman, with his 20.55 million shares, nor Scott Ferguson with his 870,000 shares, made changes to their stakes during the quarter. This might possibly be since the stock has barely moved this year and is up by just 0.4% year-to-date. Over the past year however the picture is a little bit brighter for the stock, which and has moved up by 10.8%.The Pennsylvania-based chemical and gas producer posted its earnings for the first quarter on April 30, beating analysts’ expectations by $0.01 with its earnings of $1.55 per share. Air Products & Chemicals, Inc. (NYSE:APD) announced earlier in June that it was about to launch two new defoamers, for sale initially on the North American market. Also bullish in Air Products & Chemicals, Inc. (NYSE:APD) is Eric Chen of Antipodean Advisors, who increased his stake by 43% to 498,000 shares during the first quarter.

Allergan PLC (NYSE:AGN) is another pharmaceutical company that interests both Ackman and Ferguson. Scott Ferguson had a stake of 800,000 shares in the pharmaceutical company, which was left unchanged during the first quarter. Bill Ackman on the other hand opened a new stake of 1.35 million shares in Allergan PLC (NYSE:AGN) during the first quarter, after previously teaming up with Valeant Pharmaceuticals International Inc. (NYSE:VRX) to try and acquire the company. Two weeks ago it was announced that Actavis Plc (NYSE:AGN), which acquired Allergan PLC in March 2015, would start to trade under the name Allergan Plc (NYSE:AGN) from June 15, leaving its old ticker ACT behind. Whatever the name of the stock is, the results are appealing, with a 21.3% return year-to-date and 44.0% during the last year. Allergan is clearly not through with acquisitions just yet, since it announced on June 17 that it will buy Kythera Biopharmaceuticals Inc (NASDAQ:KYTH). Kythera may be the driving force in sales that Allergan needs, since it hasn’t booked profits since its IPO in 2012. Someone who has great faith in that is Philippe Jabre and his fund Jabre Capital Partners, since he took a stake in Allergan during the first quarter consisting of 21.00 million shares.

Disclosure: None