Every quarter, many money managers have to disclose what they've bought and sold. Their latest moves can shine a bright light on smart stock picks.
Today let's look at investing giant Bill Ackman, who founded Pershing Square Capital Management in 2003. An investor with roots in real estate, Ackman is an activist, often advocating strongly for big changes at companies in which he has invested heavily. Soon after Ackman invested in the Fortune Brands conglomerate, for example, the company began looking to spin off various divisions -- which it has now done, breaking up into the alcohol-focused Beam and Fortune Brands Home & Security
Pershing Square's portfolio totaled $8.1 billion in value as of March 31, 2012, spread over just a small handful of stocks. Its top three holdings make up a whopping 55% of the portfolio's total value. Now that's concentration! They're Canadian Pacific Railway, J.C. Penney
Interesting developments
So what does Pershing Square's latest quarterly 13-F filing tell us? Here are a few interesting details:
The portfolio doesn't seem to have any new holdings or stocks that were completely sold.
Among holdings in which Pershing Square increased its stake were Alexander & Baldwin
Ackman recently gave a presentation outlining what he likes about J.C. Penney. Among other things, he's optimistic about the company's new management, new sales strategy, and cost-cutting opportunities. The company, for example, will have fewer and longer promotions and will build many stores-within-stores.
Pershing Square reduced its stake Kraft Foods
Fortune Brands Home & Security was also sold by my colleague Jim Royal, largely on valuation, as the stock has done well, almost doubling in less than a year. Ackman was right when he saw a lot of value in the spun-off enterprise. Similarly, Family Dollar, which has been posting great gains and expanding its profit margins, as well, may simply have grown too richly valued for Ackman's taste. When you have a very concentrated portfolio, it's more important than ever to focus it on the most promising stocks you see.
We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing. 13-F forms can be great places to find intriguing candidates for our portfolios.
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