Many investors find comfort in mimicking what the most successful investors do. If this describes you, Bill Ackman’s Pershing Square is a fund you must follow in 2017. With similar holdings in the BNL Portfolio, we are betting that Ackman has a year for the ages with large positions in Valeant Pharmaceuticals (NYSE:VRX), Chipotle Mexican Grill (NYSE:CMG), Fannie Mae (OTCMKTS:FNMA) and Freddie Mac (OTCMKTS: FMCC) among many others.
With that said, Bill Ackman has been on the losing end of so many big trades over the last couple years that many view him as a fake, even delusional. However, let’s not forget history. In fact, let’s learn from it.
From 2004 until the end of 2014 Pershing Square generated a total return of 692%, which beat the S&P 500’s 132% return. This made Ackman one of the best stock pickers on the planet.
Yes, he had a bad couple years, but after such large returns, big pullbacks are a natural part of the process. It happens!
Ackman gets off to good start with CMG, VRX, FMCC, and FNMA stock
If you look at the early days of 2017, Ackman is off to a good start.
Currently, CMG stock is up 5% after the company’s November comps sales showed significant improvement, and December sales were up 14.7%! Remember, BNL Finance has gone on the record several times saying that CMG stock owners “are safe” at $400, and that 2017 should be a good year thanks to very weak comps. CMG stock’s move is a good reflection of this fact.
- Why CMG stock is going higher (read here)
VRX stock is up about 6%, although it should be higher by 20% to 30% after divesting two of its smaller businesses for $2.1 billion. This pair of divestments will amount to less than 10% of Valeant’s total revenue, but the cash it generated is equivalent to 40% of VRX stock value.
- Why Dendreon divestment is game changer for VRX stock (read here)
Specifically, the Dendreon divestment is one for the ages. Dendreon could not turn profits with Provenge because of a complicated manufacturing process that required blood draws and multiple shipments for just one dose. Valeant bought Dendreon out of bankruptcy for just over $400 million two years ago, then turned around and sold the business for twice that. Given Dendreon’s woeful performance, I would not be shocked if Provenge was still a burn pit, thereby making the move even better for VRX stock.
Finally, FNMA stock and FMCC stock are two securities that could very well double in 2017 as the prospects for GSE reform has never been better. The story with FMCC and FNMA stock is complicated but Ackman has been a vocal investor of both, pleading to free Fannie Mae and Freddie Mac from government conservatorship. In 2017, it’s a real possibility, which is good news for FNMA stock and FMCC stock owners.
- Why it is a bad idea to sell FNMA stock or FMCC stock in 2017 (read here)
- Get access to the portfolio with trade notifications that outperformed the S&P 500 by nearly 200% in 2016 (learn more)
That said, CMG, VRX, FMCC, and FNMA stock are just a few of the stocks that Ackman’s Pershing Square owns. However, these are the investments that he is best known for, and have largely contributed to his woeful performance (especially VRX stock). When you look at the many things that these companies have going for them in 2017 coupled with Pershing Square’s historic performance, there is a good chance Bill Ackman has a big recovery in 2017. Its worth watching for investors who track the performance of hedge funds.