With the goal of unlocking value for shareholders, the guru's New York-based hedge fund is known for taking large positions in a handful of underperforming companies and pushing management to make changes. One of Ackman's most well-known activist targets in recent years, which did not end well for him, was Valeant Pharmaceuticals.
The investor's most notable trades for the three months ended June 30 included the sale of Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway Inc.'s Class B stock (NYSE:BRK.B), Blackstone Group Inc. (NYSE:BX) and Park Hotels & Resorts Inc. (NYSE:PK). He also added to his holding of Restaurant Brands International Inc. (NYSE:QSR).
In his largest transaction of the quarter, Ackman divested of all 5.4 million shares of Berkshire's Class B stock, impacting the equity portfolio by -15.17%. The stock traded for an average price of $182.68 per share during the quarter.
GuruFocus estimates he lost 12.38% on the investment since establishing it a year ago.
The Omaha, Nebraska-based insurance conglomerate has a $497.5 billion market cap; the Class B shares were trading around $207.85 on Monday with a price-earnings ratio of 23.05, a price-book ratio of 1.3 and a price-sales ratio of 1.96.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced. The GuruFocus valuation rank of 2 out of 10 supports this assessment since the share price and price-sales ratio are near multiyear highs.
GuruFocus rated Berkshire's financial strength 5 out of 10. Although the company has issued approximately $5.2 billion in new long-term debt over the past three years, it is still at a manageable level due to having adequate interest coverage. Since the return on invested capital is lower than the weighted cost of capital, it may have trouble turning a profit. Its assets are also building up at a faster rate than revenue is growing, indicating it may be becoming less efficient.
The company's profitability scored a 6 out of 10 rating on the back of a net margin and return on assets that outperform over half of its competitors. Berkshire is also supported by a moderate Piotroski F-Score of 4, which suggests operations are stable, and a predictability rank of three out of five stars, which is on watch as a result of a slowdown in revenue per share growth over the past 12 months. According to GuruFocus, companies with this rank typically return an average of 8.2% annually over a 10-year period.
Of the gurus invested in the Class B stock, Bill Gates (Trades, Portfolio)' foundation trust has the largest stake with 1.67% of outstanding shares. Other top guru shareholders include Diamond Hill Capital (Trades, Portfolio), Glenn Greenberg (Trades, Portfolio), Tom Russo (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Chris Davis (Trades, Portfolio), Tom Gayner (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Ruane Cunniff (Trades, Portfolio) and Wallace Weitz (Trades, Portfolio).
After buying Blackstone Group last quarter, the guru turned around and sold all 548,526 shares. The trade had an impact of -0.38% on the equity portfolio. Shares traded for an average price of $52.49 each during the quarter.
GuruFocus data shows Ackman lost an estimated 5.47% on the investment.
The investment management company headquartered in New York has a market cap of $36.99 billion; its shares were trading around $53.38 on Monday with a price-earnings ratio of 48.76, a price-book ratio of 11.31 and a price-sales ratio of 19.65.
According to the Peter Lynch chart, the stock is overvalued. The GuruFocus valuation rank of 1 out of 10 also supports overvaluation.
GuruFocus rated Blackstone's financial strength 3 out of 10. As a result of issuing approximately $6.8 billion in new long-term debt over the past three years, it has poor interest coverage and a low cash-debt ratio of 0.17.
The company's profitability did not fare much better, scoring a 4 out of 10 rating on the back of returns that outperform slightly over half of its industry peers and a moderate Piotroski F-Score of 4. Despite recording a slowdown in revenue per share growth over the past 12 months, Blackstone also has a one-star predictability rank. According to GuruFocus, companies with this rank return, on average, 1.1% annually.
With a 0.18% stake, Gayner is the company's largest guru shareholder. Pioneer, Julian Robertson (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Alan Fournier (Trades, Portfolio), David Rolfe (Trades, Portfolio), Mairs and Power (Trades, Portfolio), Dodge & Cox and First Pacific Advisors (Trades, Portfolio) also own the stock.
Park Hotels & Resorts
Having established a holding in Park Hotels & Resorts in the first quarter, Ackman dumped all 677,888 shares. The transaction impacted the equity portfolio by -0.08%. The stock traded for an average per-share price of $9.28 during the quarter.
GuruFocus data indicates he lost an estimated 51.32% on the investment.
The Tysons, Virginia-based real estate investment trust, which focuses on hotel properties, has a $2.10 billion market cap; its shares were trading around $8.98 on Monday with a price-book ratio of 0.39 and a price-sales ratio of 0.98.
Based on the price chart, the stock appears to be trading above its median price-sales value but below its median price-book ratio.
Park's financial strength was rated 4 out of 10 on the back of weak interest coverage and an Altman Z-Score of 0.48, which warns the company could be in danger of going bankrupt. The WACC also exceeds the ROIC, suggesting poor profitability.
Although it is being weighed down by a declining operating margin and negative returns that underperform a majority of competitors, the company's profitability scored a 6 out of 10 rating. The REIT has also recorded a decline in revenue per share over the past year.
Jim Simons (Trades, Portfolio)' Renaissance Technologies is the company's largest guru shareholder with a 0.66% stake. Donald Smith (Trades, Portfolio), Pioneer, Caxton Associates (Trades, Portfolio) and Ron Baron (Trades, Portfolio) are also invested in the stock.
Restaurant Brands International
Impacting the equity portfolio by 7.07%, Ackman boosted his stake in Restaurant Brands International by 66.52%, buying 10.03 million shares. During the quarter, the stock traded for an average price of $50.21 per share.
GuruFocus says he has gained an estimated 43.49% on the investment since the fourth quarter of 2014.
The Canadian fast-food holding company, which owns and operates Burger King, Tim Hortons and Popeys Louisiana Chicken restaurants, has a market cap of $16.45 billion; its shares were trading around $54.17 on Monday with a price-earnings ratio of 25.27, a price-book ratio of 10.9 and a price-sales ratio of 4.82.
The Peter Lynch chart suggests the stock is overvalued.
GuruFocus rated Restaurant Brands' financial strength 3 out of 10 on the back of insufficient interest coverage. The Altman Z-Score of 1.11 also warns the company could be in danger of going bankrupt since it has recorded a decline in revenue per share over the past year.
The company's profitability fared much better, scoring a 7 out of 10 rating. Although the operating margin is in decline, Restaurant Brands is supported by strong returns that outperform a majority of industry peers as well as a high Piotroski F-Score of 7, which indicates business conditions are healthy.
Ackman is still the company's largest guru shareholder with an 8.29% stake. Other gurus invested in the stock are PRIMECAP Management (Trades, Portfolio), First Eagle Investment (Trades, Portfolio), Pioneer, Prem Watsa (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio).
Additional trades and portfolio performance
During the quarter, Ackman also curbed his stake in The Howard Hughes Corp. (NYSE:HHC) by 10.49% and boosted the Lowe's Companies Inc. (NYSE:LOW) holding by 3.73%. He left his positions in Chipotle Mexican Grill Inc. (NYSE:CMG), Agilent Technologies Inc. (NYSE:A), Hilton Worldwide Holdings Inc. (NYSE:HLT) and Starbucks Corp. (NASDAQ:SBUX) unchanged.
The majority of the guru's$7.75 billion equity portfolio, which is composed of seven stocks, is invested in the consumer cyclical sector. The health care and real estate spaces have much smaller representations.
After several years of underperformance, Pershing Square made a comeback in 2019 with a return of 58.1%. This was substantially above the S&P 500 Index's 31.49% return.
Disclosure: No positions.
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This article first appeared on GuruFocus.