Given billionaire Bill Ackman‘s previous investing history, it’s not surprising that many investors pay attention to his fund’s letters whenever they are released. Not only is Ackman’s Pershing Square Capital Management one of the leading hedge funds in the sector, but also Ackman is one of the smartest investors on the market today. In this post, let’s analyze Platform Specialty Products Corp (NYSE:PAH).
First let’s say it’s no surprise that Ackman has invested in Platform Specialty Products Corp (NYSE:PAH). Like many investors, Ackman prizes good management, and Platform Specialty Products Corp’s management is generally regarded as top notch. Second, although chemical companies don’t grow as fast as some would like, M&A can supplement growth, especially if it is done well. With the management team at Platform Specialty Products Corp (NYSE:PAH), good M&A and integration isn’t out of the question.
Although the stock hasn’t done well this year (it’s down 2.45% year-to-date and has fallen sharply from its August highs), Ackman notes that “Platform’s earnings continued to grow this quarter as growth in the Performance Solutions business offset a decline in the Ag Solutions business”. While the drop in Ag Solutions business was due primarily due to a brought in Brazil, Ackman notes that the company’s management ‘believes it is likely it will recover these sales in future quarters’. Meanwhile, the company’s growth in its Performance solutions division has been solid, due in part to good results from a recently acquired electronics business purchased from Alent. The industrial business has been no slouch either.
Also despite a 2% tail wind due to FX, Platform’s total EBITDA nevertheless rose 3%. Due to interest savings on the account of a recent debt refinancing, the company’s earnings per share rose 18% for the period.
Lastly, there could be a catalyst in the future. Pershing Square concludes the Platform Specialty Products Corp (NYSE:PAH) comments with the following:
At the end of August, Platform announced that it intends to separate its Ag and Performance Solutions businesses into two publicly traded companies in order to increase long-term value.
Some traders believe the separation could occur by the middle of 2018.