"Tracking Bill Ackman’s Pershing Square Portfolio – Q3 2018 Update"
"Bill Ackman’s 13F portfolio value decreased ~10% from $5.80B to $5.21B this quarter.Pershing Square reduced Chipotle Mexican Grill and dropped Mondelez International.The largest three 13F positions are Restaurant Brands International, Lowes Companies, and Chipotle Mexican Grill. They together they account for ~60% of the portfolio.This article is part of a series that provides an ongoing analysis of the changes made to Pershing Square’s 13F portfolio on a quarterly basis. It is based on Ackman’s regulatory  filed on 11/14/2018. Please visit our  article for an idea on how his holdings have progressed over the years and our  for the fund’s moves during Q2 2018.Ackman’s 13F portfolio value decreased ~10% from $5.80B to $5.21B this quarter. The number of positions decreased from 8 to 7. The portfolio remains heavily concentrated with a few huge bets. The top three positions account for ~60% of the total portfolio value: Restaurant Brands International, Lowes Companies, and Chipotle Mexican Grill.In addition to partner stakes, the fund also invests the capital from Pershing Square Holdings (PSHZF), a public entity that debut in Euronext Amsterdam in October 2014. This was set up primarily to increase the amount of capital invested that is permanent. Pershing Square Holdings has widely underperformed the S&P 500 since its EOY 2012 inception, although YTD return as of early November was quite good at just over 9%. Their original flagship fund’s (2004 inception) track record is outstanding with cumulative returns at ~500% compared to ~220% for the S&P 500 index.To learn more about Bill Ackman, check-out the book “”.Note: Last month, Pershing Square disclosed a 15.2M share stake in Starbucks (SBUX) acquired at ~$51 per share and a 10.9M share stake in Hilton Worldwide (HLT).New Stakes:None.Stake Disposals:Mondelez International (MDLZ): MDLZ was a large ~12% of the 13F portfolio stake established in Q3 2015 at a cost-basis of ~$39. Q1 2016 saw a ~47% reduction at prices between $36.50 and $45. H1 2017 had seen another ~37% selling at prices between $42.50 and $47. Q4 2017 saw an about turn: two-thirds increase at prices between $39.30 and $43.50. There was a ~30% selling in Q1 2018 at prices between $40.50 and $46 and the disposal this quarter was at prices between $40.80 and $44. The stock currently trades at $43.76.Stake Increases:Lowes Companies (LOW): LOW is a large (top three) 18.60% of the portfolio stake established last quarter at prices between $81 and $101 and increased by ~9% this quarter at prices between $95 and $117. The stock currently trades at $94.91.United Technologies (UTX): UTX is a ~13% of the 13F portfolio stake established in Q1 2018 at prices between $122 and $138 and increased by ~135% last quarter at prices between $118 and $128. The stock currently trades at ~$129. For investors attempting to follow Ackman, UTX is a good option to consider for further research. This quarter also saw a ~9% stake increase.Note: Dan Loeb (Third Point) established a large activist stake in United Technologies in Q1 2018. He is pushing for a 3-way split: Otis Elevator, Climate, Controls, & Security (CCS), and Aerospace (UTC Aerospace Systems and Pratt & Whitney). Bill Ackman has endorsed this view.Stake Decreases:Chipotle Mexican Grill (CMG): CMG is a large (top three) ~18% of the portfolio stake established in Q3 2016 at a cost-basis of ~$405 per share. The position was sold down by ~30% this quarter in the high-400s price-range. The stock currently trades at ~$479. Ackman harvested gains.Note: Regulatory filings from last week show them owning 1.94M shares of CMG. This is compared to 2.06M shares in the 13F report. Around ~120K shares were disposed at ~$472 per share. Ackman still controls ~7% of CMG.Automatic Data Processing (ADP): ADP is a large ~12% of the 13F portfolio stake established in Q2 2017 at a cost-basis of $97.30 and increased by roughly four-times the following quarter at prices between $101 and $119. The stock is now at ~$143. There was a ~10% trimming in Q1 2018 at prices between $108 and $124 and another ~47% selling last quarter at prices between $113 and $140. This quarter also saw a ~4% trimming.Note 1: Regulatory Filings show them owning 21.3M shares (4.9% of business): ~4M shares listed in the 13F report is in common stock and the rest in American Style Call Options.Note 2: Per a letter to investors in June, their average entry price on ADP was $105 per share.Note 3: In November 2017, Pershing Square lost a proxy battle at ADP – his three (including him) board nominations were rejected.Howard Hughes Corp (HHC): HHC is a ~5% of the 13F portfolio position established in 2010 as a result of its spin-off from GGP Inc. (GGP). The stock has returned over 3x since the spinoff. Q3 2017 saw a one-third increase as a result of the conversion of warrants held. There was a ~53% selling (~2.5M shares) in February at ~$128 per share (underwriting agreement). That transaction was prompted to address FIRPTA issues at PSH. The stock is currently at ~$109. This quarter saw a ~3% trimming.Note: The position was sold down further after the quarter ended. Regulatory filings from earlier this week show them having an economic interest of 5.4M shares of HHC (~12.6% of the business) including 4.17M notional common share exposure thru swaps that are not listed in the 13F. This is compared to an economic interest of 7.6M shares (~18% of the business) as of last quarter.Kept Steady:Restaurant Brands International (QSR): QSR is currently the largest 13F position at ~24% of the portfolio. Pershing Square’s cost-basis is ~$16. Q3 2017 saw a ~32% selling at prices between $59 and $66. The stock currently trades at $55.39. H1 2018 had also seen a ~22% reduction at prices between $53 and $64.Note 1: Per a regulatory filing in February, they held ~4M shares of exchangeable units in addition to what is reported on the 13F.Note 2: The QSR stake came about through the merger of Tim Hortons and Burger King Worldwide. Pershing Square had a huge investment in Burger King and those shares got exchanged for QSR shares.Platform Specialty Products (PAH): On 01/23/2014, Ackman disclosed a huge new stake in Platform Specialty Products Corporation (PAH) in a 13G filing. Pershing Square was a PAH investor prior to its NYSE IPO. Q4 2014 saw a ~30% stake increase at prices between $21 and $28. Ackman’s cost-basis is around $14. The stock currently trades at $10.56. Ackman controls ~20% of the business.Fannie Mae (FNMA) and Freddie Mac (FMCC) are other long positions in the partnership - the holdings were disclosed in 13D filings on November 15, 2013 - as they are not , they are not listed in the 13F report. Ackman held just under 10% of the outstanding shares of both these businesses - 115.57M shares of FNMA at a cost-basis of $2.29 and 63.5M shares of FMCC at a cost-basis of $2.14. The combined investment outlay was ~$400M. FNMA & FMCC currently trade at $1.28 and $1.22 per share respectively. In March, Pershing Square said their Fannie/Freddie pfds now amounts to 21% of its total investment in the two GSEs. They said it is a hedge in case the resolution favors pfds more than the common.Note: Bill Ackman also has a short book. There is no regulatory requirement to disclose short positions and so only ones that Ackman voluntarily discloses are known.The spreadsheet below highlights changes to Pershing Square’s US stock holdings in Q3 2018:6/19/2018 –  – ADP – Average entry price is $105. Currently at $139. Still regards it undervalued. Might adjust sizing as it has become very large.5/23/2018: Pershing Square  ~$1B stake in Lowe’s – not seeking board seat – supportive of management and new CEO Marvin Ellison.Regulatory Filings thru 8/14/2018: Form 4 – 8/7 – PAH – misc, 13D/A – 6/27 – ADP – 24.58M shares – 5.6% of business. 4.22M shares long as in 13F and the rest in American Style Call Options."