ACKMAN: McDonald's Stock Is 'Not Cheap'

Bill AckmanBloomberg TVBill Ackman

Hedge fund titan Bill Ackman, the CEO of $US18 billion Pershing Square Capital Management, made some pretty negative comments on McDonald’s Wednesday on Bloomberg TV’s “The Pulse.”

From Bloomberg TV (emphasis ours):

“You know, 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. You know, I think the company has serious issues, but because there’s a very strong balance sheet, pays almost a 4 per cent 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.”

There was an unconfirmed rumour in December that Ackman might be long McDonald’s stock since last last year. And around the time of the rumour, Ackman told Bloomberg TV’s Stephanie Ruhle that “if McDonald’s were run like Burger King, the stock would go up a lot.” Following that comment, shares of McDonald’s had its biggest one day climb in nine months.

Last year, Ackman was the best performing hedge fund manager racking up an impressive 40% return. One of his big winners was Burger King. Pershing Square last held over 38 million shares in Restaurant Brands International — the newly formed fast-food chain operator that runs Burger King and Tim Horton’s.

Ackman is known for being a mostly long-only investor who takes large activist stakes in a handful of companies. He rarely shorts companies.

But his statement that “McDonald’s stock is not cheap” is sure to stir speculation of what his next short may be.

We reported last week that it appears Ackman may have a fairly recent, unnamed short that appears to be a company with a market cap over $US5 billion. Ackman told CNBC’s “Squawk Box” last week that he “may be done” with public shorts following his infamous Herbalife short, though.

Watch the full Bloomberg TV interview below (6:50 minute mark for McDonald’s comment):

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