Pershing Square: New Positions In McDonalds (MCD) & Automatic Data Processing (ADP) ~ 13F Filing ~ market folly

Monday, August 17, 2009

Pershing Square: New Positions In McDonalds (MCD) & Automatic Data Processing (ADP) ~ 13F Filing

This is the second quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out our series preface on hedge fund 13F filings.

The first hedge fund in our 2nd quarter 13F series is Bill Ackman's Pershing Square Capital Management. Bill is a well known value and activist player who founded Pershing after his previous firm Gotham Partners broke up. Most recently, he has been well known for his foray into shares of Target (TGT) in an attempt to unlock value and spur change at the company. While he is committed to the company long-term, he just recently trimmed his Target position (as per an amended 13D filing with the SEC). We follow Ackman & Pershing because they run a highly concentrated portfolio that is ideal for portfolio tracking purposes. For more information, check out our in-depth profile on Ackman and Pershing Square.

In our first quarter 2009 update regarding Pershing Square, we noted in their 13F filing that they had amassed a large position in EMC (EMC). Let's see what they were up to this time around. The following were their long equity, note, and options holdings as of June 30th, 2009 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.

Some New Positions (Brand new positions that they initiated in the last quarter):
Automatic Data Processing (ADP)
McDonalds (MCD)

Some Increased Positions (positions they already owned but added shares to)
EMC (EMC): Increased position by by 0.1%

Some Reduced Positions
Target (TGT): On this position, the 13F has different data, but we are ignoring that because Pershing recently filed an amended 13D which updates their TGT stake as of a much more recent date. In the filing, we see that they have reduced their overall exposure from 7.8% ownership in the company to 4.4% ownership. You can read about the specifics of the transactions in our post on Target.

Removed Positions (Positions they sold out of completely)
Alexanders (ALX)
Apartment Investment & Management (AIV)
Visa (V)
Wendys Arbys (WEN)
Yum Brands (YUM)

Flat Positions (Positions with no change since the last filing)
Greenlight Capital Re (GLRE)
Borders Group (BGP): Average price of their position is $6.98 per share (as detailed in Pershing's investor letter)

Entire Portfolio (by % of portfolio)

  1. Target (TGT): 43.28% of portfolio - calculated only using their common shares position (to help reflect the fact that they've sold out of a lot of their options positions just recently).
  2. EMC (EMC): 33.89% of portfolio
  3. Automatic Data Processing (ADP): 11.34% of portfolio
  4. McDonald's (MCD): 6.08% of portfolio
  5. Borders Group (BGP): 1.72% of portfolio
  6. Greenlight Capital Re (GLRE): 0.19% of portfolio

Okay, so before everyone freaks out: Ackman did not sell General Growth Properties (GGWPQ). It is simply not listed because the SEC has deemed GGWPQ to no longer be a reportable security (thanks KP for the link) for 13F filings. We would guess that this is possibly due to the fact that they are no longer listed on the exchange (GGWPQ is traded in OTC markets now). The main thing to take away from this though is the fact that we will still see Ackman's moves in GGWPQ through Form 4 filings since he is now on the board of directors. So, all of you GGWPQ bandwagoneers can still sleep at night. Ackman touched on his position in General Growth in one of his recent investor letters. Additionally, you can view Pershing Square's GGWPQ presentation from the Ira Sohn investment conference (where numerous hedge fund managers presented investment ideas).

The other major moves in Ackman's portfolio can be summarized as such: He added McDonald's and Automatic Data Processing as brand new positions. At the same time, he sold completely out of a number of positions, including: Alexanders, Apartment Investment & Management, Visa, Wendys Arby's, and Yum Brands (many of which he had just picked up a few quarters ago). It looks as if Ackman is making a straight swap in fast food land, favoring McDonald's over his previous holdings. That really sums it up, as Pershing runs a pretty concentrated portfolio. For more on them, make sure to check out our profile on Ackman and Pershing Square.

Assets from the collective holdings reported to the SEC via 13F filing were $2.2 billion this quarter compared to $1.9 billion last quarter, so a slight tick up. This is just one of the 40+ prominent funds that we'll be covering in our Q2 2009 hedge fund portfolio series. Check back each day as we cover prominent hedge funds.

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