Bill Ackman's Pershing Square Buys $600 Million of Investments During August Volatility

Bill Ackman's hedge fund Pershing Square Capital utilized the market volatility in early August as an opportunity to buy stocks, according to their recent letter to investors. So what did they buy?

Ackman writes,

"We have often described stock market volatility as an opportunity for Pershing Square. Since the beginning of the month, the market, and to an even greater extent, most of our holdings went on sale. We took advantage of this favorable pricing to invest more than $600 million in existing investments including Fortune Brands, Kraft, Family Dollar, Citigroup, and two new commitments. In each case, the businesses continue to make progress that meets or exceeds our expectations making our additional investments that much more compelling. Unfortunately, for most of our remaining holdings we were restricted in purchasing more by virtue of our insider status, or other regulatory or corporate charter provisions that limit our ability to increase our ownership percentage."

After writing the letter (dated August 17th), Pershing Square received permission to increase its ownership stake in J.C. Penney (JCP) to 26.1% of the company, up from the 18.2% they currently own as well.

Pershing's New Investments

Ackman did not disclose the names of his two new investments, most likely because they were/are still acquiring their position. His letter states that they should be able to share more details about one of the positions in the upcoming months.

It would make sense that he could reveal one of them at the upcoming Value Investing Congress where he will be presenting investment ideas along with many other hedge fund managers (Market Folly readers: today is the LAST day for substantial savings to the event, click here for the discount).

Ackman's investor letter drops a hint that they bought an investment that broadly falls into the category of their old General Growth Properties (GGP) investment: i.e. a situation where they were able to buy GGP for less than a dollar per share and enhanced the probability of recovery for shareholders with their active intervention. Let the guessing games begin.

In early August we detailed how Pershing Square bought more Fortune Brands (FO), but now we know they were buying more than one stock.

For more excerpts from Pershing Square's recent letter to investors, we've outlined why Ackman bought more Citigroup, as well as Pershing's hedging strategy in this crazy market.

Bill Ackman's Pershing Square Buys More Fortune Brands (FO)

Bill Ackman's hedge fund firm Pershing Square Capital has taken advantage of the recent market sell-off to add to their position in Fortune Brands (FO).

Per a Form 4 filed with the SEC, Pershing acquired 3,648,512 additional shares at prices ranging from $52.67 to $54.47 on August 5th, 8th, and 9th.

After this series of buys, Pershing Square now owns 20,818,545 shares of Fortune Brands. The majority of their purchase came at $52.67 and $52.78 and FO now trades around $53.95. This is the second time Ackman has purchased FO in the past three months.

This is an activist investment for Pershing as they've pushed for Fortune to break-up its three distinct businesses: spirits/liquor, home finishes, and they've already sold their golf segment.

For more from Ackman, head to notes from the leaders in investing summit. Ackman will also be presenting his latest investment ideas at the upcoming Value Investing Congress in New York on October 17th & 18th along with many other hedge fund managers. Be sure to sign-up here.

Bill Ackman Buys More Family Dollar (FDO) & Fortune Brands (FO)

Bill Ackman's hedge fund Pershing Square Capital Management has been on a buying spree this week.


Fortune Brands (FO)

First, they scooped up shares of Fortune Brands (FO) on June 6th and 7th (and last week as well). In total, Pershing purchased 501,397 shares of FO at prices of $62.87 and $63 per share.

After said purchases, the hedge fund now owns 17,170,033 shares of Fortune Brands. This is an activist position for Ackman and we covered his initial 13D filing last year.

The thesis here centers on breaking up the company's collection of brands. Wheels are already in motion in this regard as FO seeks to become a pure-play on the spirits business and will spin off its other divisions.



Family Dollar (FDO)

Second, Ackman was also out buying even more Family Dollar (FDO). As we covered recently, Pershing initially bought FDO in the first quarter but as of June 9th now has a 8.9% ownership stake in FDO with 10,871,793 shares, almost doubling his position in recent weeks.

At the recent Ira Sohn Conference, Ackman laid out his FDO thesis and it is largely based on FDO being an attractive leveraged buyout candidate. As we've already detailed, Family Dollar actually received a bid to go private from its second largest shareholder, Nelson Peltz's Trian Fund. While they essentially offered between $55 and $60, shares currently trade around $52.75.

You can view the rest of Bill Ackman's portfolio by subscribing to our Hedge Fund Wisdom newsletter.

Pershing Square Q3 Letter: Ackman Provides Updates on Positions

Bill Ackman's hedge fund Pershing Square's third quarter letter is pretty much an investor's dream. The manager provides commentary and updates on practically all of his positions and is the epitome of transparency. But then again, it's not necessarily that hard when you run such a highly concentrated book like Ackman does. Pershing Square of course is one of the 23 prominent hedge fund portfolios we detail and analyze in the new issue of our Hedge Fund Wisdom publication.

Pershing Square has returned 292.7% net of all fees since inception in 2004. For 2010, their main fund is up 7.6% year-to-date. The only real noticeable change in their portfolio is that they exited Landry's Restaurants, as the company was bought out.

Fortune Brands (FO)

A while back we highlighted Ackman's new position in Fortune Brands (FO). His letter highlights that he thinks their Spirits business is a great consumer niche as it has high barriers to entry, sustainable profit margins, and economic resiliency. What's comical here is that Ackman filed a 13D signifying his activist intent with the investment and even though he hasn't really done much in that regard yet, the stock is already up 40% since he purchased it. It appears though that management will work with Ackman to unlock value.

J.C. Penney (JCP)

The other new position in Pershing Square's portfolio is J.C. Penney (JCP). Ackman likes JCP's cheap valuation, solid assets, and brand name. Their average purchase price was $25.28 and the stock already trades north of $33. The hedge fund manager doesn't necessarily outline his thesis in the letter, though he does point out Vornado Realty Trust's (VNO) involvement in the stock. The publicly traded REIT also acquired a large ownership in JCP shares. In the past, we've highlighted Ackman's potential JCP real estate thesis.

Ackman notes that his firm sold some shares of their Kraft (KFT) and Target (TGT) positions to finance the purchase of their two new positions. The rest of Pershing Square's letter delves into updates regarding their positions in Automatic Data Processing (ADP), General Growth Properties (GGP), Howard Hughes (HHC), Corrections Corp (CXW), and Citigroup (C). This was interesting mainly because it's been a while since we heard from Ackman regarding his Corrections Corp position, a name we originally posted his investment thesis on.

Embedded below is Pershing Square Capital Management's third quarter letter to investors:



You can download a .pdf copy here.

In other recent investment ideas from Ackman, he recently declared he is bullish on housing. And interestingly enough, John Paulson says to buy housing as well.

Bill Ackman's Question & Answer Session at the Value Investing Congress

Instead of giving a presentation at the Value Investing Congress, Pershing Square hedge fund manager Bill Ackman engaged in a question and answer session. We'll dive into each of the various topics he addressed below. Keep in mind that we've published notes from John Burbank and Lee Ainslie's presentations, as well as further notes from day 1 of the Congress if you missed either of those.

Bill Ackman ~ Pershing Square Capital

On the topic of JC Penney (JCP): Ackman recently started an activist position in JCP and he says this is the most economically sensitive stock that Pershing Square owns. While it is an activist investment, he has not yet spoken to the company's management. However, he believes it is very cheap and a high quality asset. This is mainly due to its real estate assets (arguably better than Macy's ~ M or Sears Holdings ~ SHLD). Ackman also highlights JCP's strong balance sheet as the company is close to being debt neutral. He also says JCP has significant non-operating assets, something that he interestingly enough stumbled upon during his work on the General Growth Properties (GGP) bankruptcy.


On the economy & markets in general: Ackman is pretty bullish on the economy and thinks the stock market is relatively cheap. He believes that the weak dollar is a huge advantage for US companies but the unemployment situation continues to be a problem. Also, he opined that the environment is ripe for corporate acquisitions and thinks this should help boost the value of equities. The one thing he believes is missing is confidence in both business and the consumer.

Interestingly enough, Pershing Square only has 7% short exposure to equities. As we've pointed out in the past, this is most likely due to the fact that Pershing likes to utilize credit default swaps (CDS) for shorting and hedging. In fact, we've detailed how Ackman bought BP credit default swaps.

Pershing Square only has a 7-person investment team and likes to seek companies with high cashflow. Ackman likes to focus on investments in the US as the companies are easier to deal with and he is familiar with the legal system. Via his past experience with Sears Holdings, he says his biggest takeaway was the ability to enact change. Ackman said that (paraphrasing here): 'our competitive advantage is the ability to buy a stake in a company and make something happen.' Undoubtedly he will lean on this mantra with his new activist investment in Fortune Brands (FO).


On the topic of financials: He notes that many banks have aggressively marked down their books and cited Citigroup (C) and Bank of America (BAC) as perfect examples. Keep in mind that Ackman bought Citigroup earlier this year.

On the topic of General Growth Properties (GGP): Ackman pointed out that GGP has some prime real estate in Las Vegas via the Summerlin property. GGP's new spin-off, Howard Hughes Co, owns this property and will also own the South Street Seaport (a property Ackman sees value in). Via GGP's emergence from bankruptcy and re-structuring into two separate companies, GGP will retain the high quality cashflow properties while the Howard Hughes spin-off will focus on lesser developed assets.

This concludes notes from Bill Ackman's Q&A session at the Value Investing Congress. For more on Ackman's hedge fund, be sure to check out our profile of Pershing Square.

Stay tuned later this morning as we'll be providing live updates of the second day at the Value Investing Congress so follow @marketfolly on Twitter. Be sure to also check back at MarketFolly.com frequently for full notes.

Pershing Square Goes Activist on Fortune Brands (FO)

Bill Ackman's hedge fund Pershing Square Capital Management has apparently got the activist itch with his latest slew of 13D filings with the SEC. Due to portfolio activity on October 4th, 2010, Ackman disclosed a 10.9% ownership stake in Fortune Brands (FO) with 16,668,636 shares. This is a brand new position.

The hedge fund also has exposure to 603,486 notional shares of common stock via cash-settled total return swaps. This brings their aggregate economic exposure in FO to 17,272,122 shares (or an 11.3% stake in the company). This comes immediately after Pershing Square disclosed a new activist position in JC Penney (JCP) as well.

Ackman's hedge fund started acquiring shares of FO as early as July 12th around $40-41 per share. Shares of the company are already trading north of $55, with a recent 7% gain due to the news of Ackman's activist involvement. Overall, Pershing paid in excess of $764 million for their position in Fortune Brands. The 13D filed with the SEC is filled with the typical jargon regarding an activist position, so expect Ackman to work with management, etc. You can see the full extent of Pershing's FO trades here.

Without a doubt, Ackman's investment style centers on making few, concentrated bets and then monitoring them very closely (and in the two most recent cases, going activist). We'll have to wait and see what he has in store for his latest two plays, but you can bet he'll be talking about at least one of them tomorrow at the Value Investing Congress. To see the rest of Ackman's investments, head to our newsletter: Hedge Fund Wisdom.

Taken from Google Finance, Fortune Brands is "a holding company with operating companies engaged in the manufacture, production and sale of distilled spirits, home and security products, and golf products."