#3 Canadian Pacific Railway Limited (USA) (NYSE:CP)
– Shares Owned by Pershing Square (as of December 31): 13.94 million
– Value of Holding (as of December 31): $1.78 billion
Like the two stocks mentioned previously, shares of Canadian Pacific Railway Limited (USA) (NYSE:CP) have also suffered high double-digit loss (almost 30%) in the past one year. However, they are still trading up over 160% from the end of the third quarter of 2011, when Pershing Square first initiated a stake in the company and consequently managed to overhaul the board and replace its top management in 2012. Last year the company faced a sort of a double whammy in the form of a decline in prices of commodities and energy. Mr. Ackman highlighted in his annual letter why Pershing didn’t reduce its stake in the company when the stock was trading at higher levels by writing:
“We made a similar error in not trimming our Canadian Pacific position when it reached ~C$240 per share. While we still believed CP was trading at a discount to intrinsic value at that price and there was the potential for CP to complete an industry-transforming, value-creating merger, in light of the size of the position as a percentage of the portfolio, and concerns we had about the Chinese economy, it would have been prudent to sell a portion of our investment.”
On March 23, Archer Daniels Midland Company (NYSE:ADM) filed a suit against Canadian Pacific Railway Limited in the U.S. District Court for the Central District of Illinois, alleging that its business was hampered due to service disruptions during 2013 and 2014 at its crop-processing plants in North Dakota and Minnesota. Billionaire Jorge Paulo Lemann‘s 3G Capital initiated a stake in Canadian Pacific Railway Limited during the fourth quarter by purchasing 200,000 shares of the company.
#2 Zoetis Inc (NYSE:ZTS)
– Shares Owned by Pershing Square (as of December 31): 41.82 million
– Value of Holding (as of December 31): $2 billion
Moving on, Zoetis Inc (NYSE:ZTS) first became a part of Pershing Square’s portfolio in the third quarter of 2014, following which the fund increased its stake in the company by 651% and 1% during the next two quarters, respectively. Another hedge fund, which initiated a stake in Zoetis Inc (NYSE:ZTS) during the third quarter of 2014 was Krishen Sud‘s Sivik Global Healthcare, it owned 45,000 shares of the company going into 2016. Last year the Street was rife with rumors that Mr. Ackman is pushing for a merger deal between Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and Zoetis Inc (NYSE:ZTS). However, the deal never materialized since Valeant walked away from it after having talks with Zoetis. Shares of Zoetis have fallen by over 11% so far this year and are trading in a tight range since the past two months. The company has managed to beat analysts’ earnings expectations consistently for the past nine quarters and most analysts believe that it will continue to perform well in the future. On March 15, analysts at Jefferies Group reiterated their ‘Buy’ rating on the stock, while upping their price target on it to $53 from $50.
#1 Air Products & Chemicals, Inc. (NYSE:APD)
– Shares Owned by Pershing Square (as of December 31): 20.55 million
– Value of Holding (as of December 31): $2.67 billion
Air Products & Chemicals, Inc. (NYSE:APD) was Pershing Square’s largest equity position going into 2016, accounting for over 20% of the value of its portfolio at the end of December. The fund first initiated a stake in the company during the second quarter of 2013 and since then shares of Air Products & Chemicals, Inc. (NYSE:APD) have appreciated by almost 60%. Air Products & Chemicals, Inc. (NYSE:APD) is also the only stock in this list, whose shares are trading in the green for 2016, up 10% year-to-date. The ownership of Air Products & Chemicals among hedge funds covered by us declined to 55 from 77 during the fourth quarter With a stake of 5.38 million shares of the company, billionaire Andreas Halvorsen‘s Viking Global trailed Pershing Square as the largest shareholder of Air Products & Chemicals among funds covered by us at the end of December. According to recent reports the company is in advanced talks with Germany-based Evonik Industries to sell its performance materials unit in a deal which could be valued at more than $3.5 billion.