Canadian Pacific Railway Limited (USA) (NYSE:CP) has been an amazing success story — shares of the railroad giant are up nearly 90% since Hunter Harrison was named CEO last year. Ackman’s fund, Pershing Square, had to fight a proxy contest to get Harrison appointed CEO.
In the run-up to the proxy vote, Ackman gave a presentation in which he blamed nearly all of Canadian Pacific Railway Limited (USA) (NYSE:CP)’s problems on its then current management, and in particular, its CEO Fred Green.
Evidently, Ackman was on to something, as Harrison has so far delivered strong results on the job, including the company’s best first quarter earnings report ever.
As of the end of March, Pershing Square remains heavily invested in Canadian Pacific — in fact, it’s the fund’s largest holding, representing almost one-third of Pershing Square’s capital. During the original proxy contest, Ackman noted that Pershing tends to hold its investments for roughly four years.
But as good of an investment as Canadian Pacific has been, J.C. Penney Company, Inc. (NYSE:JCP) has been equally as bad. Since Ron Johnson took over late in 2011, shares of the retailer are down over 40%.
Unlike Hunter Harrison who had a distinguished railroad career, Johnson was not experienced when it came to selling clothing. Although his strategy worked marvelously when he was selling iPhones and Macs, his ideas about pricing and advertising turned away many of J.C. Penney’s key customers.
Now, J.C. Penney Company, Inc. (NYSE:JCP) has turned to Mike Ullman, the CEO Ackman ousted in the first place. Although Pershing Square has yet to publicly comment on Ullman’s qualifications, there has been speculation that Ackman was trying to find a replacement. However, The New York Post reports that Ackman has lost his influence on the board, which has decided to stick with Ullman for the foreseeable future.
At any rate, Ackman has said he intends to keep his investment in the retailer.
Investing in The Procter & Gamble Company (NYSE:PG)
Given that AG Lafley was himself a former successful Procter & Gamble CEO, I think it’s more probable that the consumer giant will turn out like Canadian Pacific rather than J.C. Penney Company, Inc. (NYSE:JCP).
Lafley won’t be undertaking a radical redesign of Procter & Gamble, just attempting to improve the company’s performance.
With a roughly 3% dividend yield and a solid portfolio of dozens of products people consume every day, Procter & Gamble remains a fairly safe stock. Even if Lafley fails to generate the performance improvements he had promised, shares are not likely to experience a significant decline, baring a market selloff.
Ultimately, Procter & Gamble remains a boring stock, but it has an interesting upside.
The article Procter & Gamble: 34% Upside With Little Risk? originally appeared on Fool.com is written by Salvatore “Sam” Mattera.
Joe Kurtz owns shares of J.C. Penney Company. The Motley Fool recommends Procter & Gamble. Salvatore “Sam” is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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