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.

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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.

Holding On To Air Products & Chemicals

Air Products & Chemicals, Inc. (NYSE:APD), one of Pershing Square’s oldest bets, is still in play as the fund’s management team refrained from adjusting the position. The fund continues to hold 7.6 million shares worth some $1.08 billion at the end of the second quarter. So far this year, the stock is up by 18%, having ended Monday’s trading session at $151.52 per share. The company pays an annual dividend of $3.44 per share, providing investors with a 2.30% yield. For the most recent quarter, Air Products & Chemicals, Inc. (NYSE:APD) posted $2.43 billion in revenue and adjusted earnings of $1.92 per share, while analysts had predicted $1.91 in earnings per share on the back of $2.45 billion in revenue. On August 12, analysts at JPMorgan issued an update on Air Products & Chemicals, Inc. (NYSE:APD), raising their rating to ‘Overweight’ from ‘Neutral’ and boosting their price target to $160 per share from the previous target of $140 per share.

Job Done at Canadian Pacific

During the second quarter, Pershing Square managed to offload 29% of its stake in Canadian Pacific Railway Limited (USA) (NYSE:CP) and held 9.84 million shares worth $1.27 billion at the end of June. However, earlier this month Pershing said in a statement that it had liquidated the position entirely and Mr. Ackman said he would step down from the company’s board of directors when his term expires. Mr Ackman got involved with Canadian Pacific back in 2011, looking to overhaul the company’s management. Within a year, he managed to win a shareholder proxy contest and install Hunter Harrison, a veteran of the railroad industry, as the company’s CEO. Under Harrison’s watch Canadian Pacific Railway Limited (USA) (NYSE:CP) has thrived and Ackman rubbed his hands as Pershing Square racked in approximately $2.6 billion in total gains according to Forbes. John Griffin‘s Blue Ridge Capital had its stake in Canadian Pacific increased by 11% to 1.69 million shares worth $217 million at the end of June.

Numero Uno

Restaurant Brands International Inc (NYSE:QSR) is Bill Ackman’s new top dog. According to the 13F filing, Pershing Square holds 39.1 million shares valued at roughly $1.63 billion. So far this year, the stock managed to advance by 30%. The owner of Burger King and Tim Hortons managed a seventh consecutive quarter of positive sales growth, although the latest figures fell short of expectations amid soft sales in the US and Canada. Sales at Burger King grew by 0.6%, while Tim Hortons sales were up by 2.7%, below analysts’ forecasts of 2.2% and 3.5% of growth, respectively. For the second quarter, Restaurant Brands International Inc (NYSE:QSR) posted $0.41 in earnings per share on the back of $1.04 billion in revenue, topping analysts’ estimates of $1.05 billion in revenue and earnings of $0.35 per share. Warren Buffet‘s Berkshire Hathaway is also invested in Restaurant Brands International Inc (NYSE:QSR), having indicated in its latest 13F filing ownership of 8.43 million shares worth $351 million.

Disclosure: none