We recently published a list of Bill Ackman’s Stock Portfolio: Top 9 Stocks to Buy. In this article, we are going to take a look at where Canadian Pacific Kansas City Limited (NYSE:CP) stands against other stocks to buy in Bill Ackman’s portfolio.
William Albert Ackman, more commonly known as Bill Ackman, is the founder and CEO of Pershing Square Capital Management, a hedge fund management company. Famous for his concentrated portfolio, with stakes in only 8 to 12 stocks at a time, Bill Ackman’s recent portfolio modification has revealed that 47% of his hedge fund is invested in just three stocks.
Analysis of his portfolio reveals that Bill Ackman invests in stocks that are mispriced relative to the long-term value of the company. Historically, this philosophy has served him well since Pershing Square’s total value was just under $13 billion by the end of the third quarter of 2024 with only 9 stocks.
A longtime supporter of the Trump administration, Ackman has been vocal about the benefits that the newly elected president will bring to the investment front. In addition to the prospects of deregulation and corporate tax cuts that could allow for stock prices to rise and have made many investors bullish on the market, Bill Ackman has more vested interests in the Trump office. Pershing has a roughly 10% stake in the common shares of the government-sponsored entities. He took to X to discuss his hypothesis about how Donald Trump could help these giants exit government conservatorship and be recapitalized, leading to substantial shareholder gains for Pershing Square.
In early 2024, Ackman launched a U.S. closed-ended fund called Pershing Square USA, Ltd., and talked about it during his 2024 letter to investors:
“The launch of PSUS is one of a number of strategic initiatives we plan to undertake which we believe will increase the long term sustainability of Pershing Square Capital Management, L.P., (“PSCM” or the “Investment Manager”), and will benefit PSH by reducing the performance fees that it pays. To this end, in June, we sold a 10% interest in PSCM, the proceeds of which will be used to anchor new fund launches including PSUS.”
However, Pershing Square officially canceled its IPO just one day after filing with the SEC due to a $2 billion listing as opposed to its original target valuation of $25 billion. Finally, while announcing the IPO cancellation on X, Ackman wrote “We will report back once we are ready to launch a revised transaction,” hinting at the possible launch of PSUS without listing shares on a stock exchange.
Our Methodology
The stocks discussed below were picked from Pershing Square’s Q3 2024 13F filings. They are compiled in the ascending order of Pershing Square’s stake in them as of September 30, 2024. In order to assist readers with more perspective, we have included the hedge fund sentiment regarding each stock using data from over 900 hedge funds tracked by Insider Monkey in the third quarter of 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A freight train making its way through a majestic mountain range, snow-capped peaks in the distance.
Canadian Pacific Kansas City Limited (NYSE:CP)
Number of Hedge Fund Holders as of Q3: 53
Pershing Square’s Equity Stake: $1.27 Billion
Pershing Square held roughly 14.9 million shares of Canadian Pacific Kansas City Limited (NYSE:CP) by the end of the third quarter of 2024 with no significant decrease in its Q2 holding of the stock. However, the value of the stock increased to $1.27 billion at the end of Q3 from just under $1.18 billion in Q2.
At the end of the third quarter of 2024, 53 hedge funds owned stocks in Canadian Pacific Kansas City Limited (NYSE:CP). Since only 45 funds had stakes in the company when the second quarter ended, it indicates a strong hedge fund sentiment about the company. Its Q3 revenue was announced to be $3.5 billion which demonstrated year-over-year growth of 6%.
Headquartered in Calgary, Canada, and founded in 2001, Canadian Pacific Kansas City Limited (NYSE:CP) provides rail freight transportation services to link Canada, the United States, and now across Mexico since its recent acquisition of Kansas City Southern in 2023. CP has grown significantly since then, as the acquisition allowed it to expand into a broader market and offer its services between the three biggest economies in the continent. Currently stretching roughly 20,000 miles in rail tracks and employing 20,000 railroad employees, the company boasts unrivaled access to major ports from Vancouver to Atlantic, Canada, and the Gulf of México to Lázaro Cárdenas, México. It offers a range of freight transportation services, logistics solutions, and supply chain expertise to North American customers.
As a result, in December 2024, Jefferies reiterated its Buy rating on shares of Canadian Pacific Kansas City Limited (NYSE:CP) and kept the firm’s price target consistent at $100.
Here is what Pershing Square Holdings said about Canadian Pacific Kansas City Limited (NYSE:CP) in its second quarter 2024 investor letter:
“Volume growth of 6% in the second quarter was well ahead of management’s expectations, driven by synergy wins and solid Canadian grain shipments. CPKC has made considerable progress on realizing revenue synergies despite a challenging freight environment, and now expects to exit 2024 with C$800 million of new business. These wins span a wide variety of end markets from automotive to corn, demonstrating the unique value proposition of CPKC’s network.
Cost synergies are also tracking ahead of plan as CPKC realizes savings from combining procurement and general and administrative functions. These cost savings together with strong operations across the network led to a 280 basis point year over-year improvement in CPKC’s adjusted operating ratio in the second quarter.
We believe that CPKC’s one-of-a-kind network and industry-leading management team are well positioned to deliver continued synergy wins and excellent operations, which should generate strong double-digit earnings growth in the coming years.”
Overall, CP ranks 7th on our list of stocks to buy in Bill Ackman’s portfolio. While we acknowledge the potential for CP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.