William Ackman’s Pershing Square has a very concentrated portfolio. It isn’t very difficult to analyse his 12 stock 13F portfolio. The twelve stocks had a total value of $5.8 Billion at the end of December. These stocks returned 2.3% since then, underperforming the SPY by 3.6 percentage points. Bill Ackman’s returns have displayed option-like characteristics for the past two years. His General Growth Properties investment is almost as big as John Paulson’s subprime shorts. In May 2009, he recommended GGP stock at the Ira Sohn Conference and the stock returned more than 1000% since then. As a result of that investment, Ackman had a great 2010, returning 29.7%.
This is very important because one might be imitating 90% of Ackman’s holdings and getting below market returns while Ackman’s clients enjoy 30% returns.
Bill Ackman is a long term value investor, taking advantage of short term downward moves in prices. In a recent CNBC interview, he said “We made a lot of money investing in restaurant companies that were doing poorly in terms of same store sales growth in the short term”. He is particularly successful at special situations investments.
During the fourth quarter Bill Ackman made the following changes to his portfolio:
1. Automatic Data Processing (ADP): Ackman sold most of his 8.7 million shares during the fourth quarter. Interestingly, ADP was one of his best performing stocks this year, returning 7.5% vs. SPY’s 5.9%. Whitney Tilson is extremely bullish about ADP in 2011.
2. Borders Group (BGP): This is one of Bill Ackman’s bad investments. Ackman didn’t change his holdings in BGP but the stock kept declining. The stock lost 72% so far in 2011.
3. Citigroup (C): Bill Ackman’s Citigroup investment remained virtually unchanged. He had 146 million shares at the end of 2010. David Tepper’s Appaloosa, Daniel Loeb’s Third Point, Andreas Halvorsen’s Viking Global, Richard Perry’s Perry Capital, Joseph DiMenna’s Zweig-DiMenna, Leon Cooperman’s Omega Advisors, and John Paulson’s Paulson & Co. have large investments in Citigroup. The stock underperformed the SPY by 2.7 percentage points so far in 2011.
4. Corrections Corp America (CXW): Ackman sold 29% of his CXW holdings during the fourth quarter. The stock hasn’t been performing well after topping $26 in early November.
5. Fortune Brands (FO): Pershing Square was buying FO in September and early October, and as a result there’s a huge increase in Pershing’s Fortune Brands holdings. This is old information though. Markets initially reacted positively to Ackman’s involvement with Fortune Brands. However, the stock returned only 1.3% since the end of December.
6. General Growth Properties (GGP): GGP performed spectacularly in 2010 but lost 0.2% since the end of December. Bill Ackman hasn’t sold a single share in GGP yet.
7. General Motors (GM): Bill Ackman had more than $250 Million in GM stock in his portfolio at the end of December. David Tepper’s Appaloosa, Roberto Mignone’s Bridger Management, Richard Perry, and Leon Cooperman are among the other hedge fund managers with GM investments. GM lost 1.1% so far in 2011.
8. Greenlight Re (GLRE): Pershing Square didn’t change its Greenlight Re (GLRE) investment. The stock returned 7.4%, exceeding David Einhorn’s Greenlight’s 2011 performance so far.
9. Howard Hughes Corp (HHC): Pershing Square disclosed nearly 5.5 million shares of HHC in their portfolio on November 9th. Now he has only 3.6 million shares in his 13F portfolio. Ackman actually didn’t sell any shares in HHC. The difference is his HHC warrants, which are exercisable for 1,916,667 common shares. He doesn’t have to report them on 13Fs.
10. Kraft Foods Inc (KFT): Bill Ackman was bullish about KFT but Warren Buffett has been selling his KFT holdings for the past year. Kraft lost 2.7% since the end of December, underperforming the SPY by 8.6 percentage points.
11. JC Penney (JCP): Bill Ackman is extremely bullish about JC Penney. He says all of the metrics show that this a cheap stock and cheap business. “The business has also a lot of operating potential, the margins are lower than where they could be and the revenues are lower than where they could be,” Ackman said. The stock returned 3% during the past week and 13% since the beginning of this year. This is the biggest position in Ackman’s 13F portfolio, with a total value of $1.4 Billion.
12. Target (TGT): Pershing Square sold nearly half of its Target (TGT) holdings during fourth quarter. The stock lost 9.5% since the beginning of this year, and is the worst performing stock in Ackman’s portfolio.