Billionaire Bill Ackman Trims Stake in Zoetis; Still Bullish on Restaurant Brands International, Mondelez

The last 12 months have proved to be a great challenge for billionaire Bill Ackman, one of the mavericks of the hedge fund world. Once his top equity bet, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) plummeted by 90% from its all-time high a year ago, amid a scandal involving drug price hikes and the use of a specialty pharmacy Philidor to distribute some of its more expensive drugs. On top of that, Mr Ackman’s crusade against Herbalife Ltd. (NYSE:HLF) has hit a stumbling block when the company reached a deal with the U.S. Federal Trade Commission to settle claims regarding some of its business practices. In December 2012, Bill Ackman announced he was short $1 billion worth of Herbalife stock.

Adding everything up, Pershing Square lost 20.5% in 2015 and has found itself under pressure from investors that wanted to get out. At the end of the second quarter, the $7.15 billion worth of public equity investments were concentrated in nine long positions, which later decreased to eight as the fund liquidated its stake in Canadian Pacific Railway Limited (USA) (NYSE:CP). Mr Ackman has also significantly reduced another major position, raising questions as to whether he is seeking to raise cash in response to investor redemption requests or is freeing up funds for new investments. In addition, he maintained the stake in Valeant unchanged at 21.59 million shares, but the value slid to $434.84 million. In this article, we are going to take a look at Mr. Ackman and Pershing Square’s top bets and some significant moves made during the second quarter.

We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see more details here).

Halving Stake in Zoetis

The most significant move done by Bill Ackman during the quarter was the decrease in Pershing Square’s holding of Zoetis Inc (NYSE:ZTS). According to the recent 13F filing, the fund nearly halved its stake to 21.2 million shares, worth a little over $1 billion at the end of June. Pershing Square then further decreased its holding to 18.9 million shares, which amount to 3.8% of the company’s outstanding stock. Given Monday’s closing price of $52.38 per share, the fund’s position is currently worth $989.5 million. At the end of the first quarter, Zoetis was Pershing Square’s top equity bet. Speculation about a potential exit from the Zoetis Inc (NYSE:ZTS) position first surfaced in April, when the fund’s representative on the company’s board of directors, William F. Doyle, announced his departure. Since Pershing Square initiated its position during the third quarter of 2014, the stock climbed by roughly 40%.

Keeping Tabs On Mondelez

Bill Ackman is still keeping tabs on Mondelez International Inc (NASDAQ:MDLZ), leaving his fund’s position unchanged. At the end of June, Pershing Square held 22.9 million shares of the Oreo maker that carried an estimated value of $1.04 billion. Speculation about the future of Mondelez International Inc (NASDAQ:MDLZ) has resurfaced recently, after the company’s attempted $23-billion takeover of Hershey Co (NYSE:HSY) failed. Some investors speculate that Mondelez initiated the bid to protect itself from being taken over, while others see it as an attempt to attract a buyout offer for itself. It is yet unclear what is Bill Ackman’s position, but Nelson Peltz‘s Trian Partners, another activist investor that holds a sizable stake, has been advocating for a merger for quite some time. TIAA Global Asset Management’s Stephanie Link sees Kraft Heinz Co (NASDAQ:KHC) as a potential bidder. Nelson Peltz and Trian reportedly hold a little over 48 million shares of Mondelez, valued at $2.18 billion.

On the next page we’ll take a look at Pershing Square’s top three equity bets heading into the third quarter.