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Billionaire Bill Ackman Divulges Major Q1 Equity Moves

Billionaire William A. Ackman, the founder of hedge fund Pershing Square Capital Management LP, has experienced an uncharacteristic rough patch over the past several months, which the media has eaten up. His fund has suffered greatly from its huge bet on widely-scrutinized pharmaceutical company Valeant Pharmaceuticals Intl Inc. (NYSE:VRX), which has come under intense political and regulatory scrutiny, as well as fierce attacks from short sellers. Pershing Square manages a rather concentrated equity portfolio, which makes Mr. Ackman and his fund vulnerable to sharp price declines in one or more of his top stock picks. In a quarterly letter to investors released earlier this month, Mr. Ackman revealed that Pershing Square was down by 18% net-of-fees through the end of April after a strong 10.2% gain recorded in April. While many retail investors will likely be wary of Mr. Ackman’s stock picks at the moment, one can still benefit from having a look at his equity portfolio and top moves, given his exceptional long-term performance prior to the Valeant bet. In this article, we’ll take a look at five portfolio moves made by Mr. Ackman during the first quarter.

At Insider Monkey, we track around 785 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).

Ackman Boosts Stake in Restaurant Brands International Inc. (NYSE:QSR)

Pershing Square increased its exposure to Restaurant Brands International Inc. (NYSE:QSR) by 1.15 million shares during the first quarter of 2016, to 39.15 million shares. The upped stake was worth $1.52 billion on March 31 and made up 17.2% of the fund’s concentrated equity portfolio. The owner of the Tim Hortons and Burger King quick service restaurants has seen its market value gain 8% since the beginning of 2016. Although the company’s reported sales for the first quarter of 2016 were down by 1.8% year-over-year, both Tim Hortons and Burger King saw comparable-store sales grow during the quarter; the former by 5.6% and the latter by 4.6%. The comparable-store sales growth was mainly driven by the introduction of new products, including Grilled Dogs at Burger King and croissant breakfast sandwiches at Tim Hortons. Warren Buffett’s Berkshire Hathaway owns 8.44 million shares of Restaurant Brands International Inc. (NYSE:QSR) as of March 31.

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Mr. Ackman Cuts Stake in Air Products & Chemicals Inc. (NYSE:APD) by 63%

Bill Ackman’s hedge fund trimmed its stake in Air Products & Chemicals Inc. (NYSE:APD) by 12.95 million shares during the first three months of 2016, ending the March quarter with 7.60 million shares. The reshuffled position was worth $1.09 billion on March 31 and accounted for 12.4% of Pershing Square’s portfolio. In September 2015, the U.S industrial gas producer announced its intentions to spin-off its Materials Technologies business into an independent publicly-traded company, called Versum Materials LLC. Meanwhile, Air Products & Chemicals recently agreed to sell the performance-materials division of the Materials Technologies business to German specialty chemicals and materials company, Evonik Industries AG, for $3.8 billion. Mr. Ackman and his team “view the sale favorably” because it eliminates “market risk from the financing required for a spinoff transaction”. Shares of Air Products & Chemicals are up by 8% year-to-date. Andreas Halvorsen’s Viking Global has 6.91 million shares of Air Products & Chemicals Inc. (NYSE:APD) in its equity portfolio as of the end of March.

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We’ll study three more moves executed by Pershing Square during the first quarter on the next page.

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