Mr. Ackman said that he did not ask Warren Buffett for an advice, while he was looking at Tesco PLC (LON:TSCO), but he added that there is a lot of negative sentiment when “Warren Buffett is giving up.” On the other hand, Tesco still has a lof of assets, but Pershing Square has had “difficulties with retail” in the past, which probably caused the investor to renounced the idea of investing in Tesco, and said that he has no plans to invest in the UK.
Another investment that Mr. Ackman mentioned was 3G Capital, a company that played a major role in the recent Burger King’s acquisition of Tim Hortons, after which the Brazilian investment firm obtained a 51% stake in the newly formed Restaurant Brands International Inc (NYSE:QSR). Pershing Square, as a former shareholder of Burger King, owns an 18.8% stake (according to the latest filing). Mr. Ackman also mentioned that a small part of his personal funds are invested with 3G, while the majority are represented by his holding in Pershing Square.
“At this point, we’re a Burger King shareholder. Burger King I think is taking very meaningful market share away from McDonald’s. We have a lot of confidence in the Burger King management team. So I think it’d probably be unlikely for us to be competing with ourselves. And I think McDonald’s stock is not cheap. I think that can be a serious issue because there’s a very strong balance sheet, pays almost a 4 percent dividend yield. I think that supports the stock price. So I think it’s not as interesting because the dividend supports a value that I think is maybe not justified based on the current performance of the company,” Mr. Ackman also said.
During the interview, Mr. Ackman also provided his opinion regarding the energy sector. He considers that now it is not a good time to have a big exposure to this sector of the economy, but there will appear opportunities in the future. However, Pershing Square might not be the one that will pursue this opportunities since the fund usually invests in companies that are not impacted by energy prices going up and down.
Nevertheless, Pershing Square still has some exposure to oil prices, due to its stake in Canadian Pacific, which among other things is also a big transporter of oil. However, Mr. Ackman assured that the company will not face any issues with oil prices falling, since only a small portion of Canadian Pacific’s revenue comes from transportation of oil, in comparison with other commodities.
But getting back to Pershing Square Holdings Ltd (AMS:PSH), Mr. Ackman considers that his firm is traded cheaply due to some short-term technical factors. Moreover, while there are only a number of companies that managed to earn between 20% and 25% on equity, they traded at an average of 2.7-2.8 times book value, which is significantly above Pershing Square Holdings Ltd (AMS:PSH), which trades at 0.9 times book value.
In addition, Pershing Square will get significant amount of cash after the deal between Actavis and Allergan is completed, and within the next couple of months, the fund will have to decide what to do with this capital. Pershing Square will continue to pursue investment opportunities among large companies.
The full video of the interview is available below:
Disclosure: none
