Pershing Square released its quarterly 13F filing with the SEC on May 15th. Applying Wall Street estimates and valuation models, I highlight the firm’s most undervalued stocks below.
Pershing Square’s Most Undervalued Holdings
To determine which stocks are trading below their intrinsic value, aka “fair value” I used the finbox.io Fair Value estimates. I also wanted to blend in some indication of which stocks might be ready to make a move up soon because they’re popular with Wall Street analysts.
I calculated an average using the finbox.io fair value upside and analyst upside to create a blended upside which I then used to rank the most undervalued holdings.
Here are the top stocks based on my calculations:
|Ticker||Name||Upside (finbox.io)||Upside (Analyst Target)||Blend Upside|
|PAH||PLATFORM SPECIALTY PRODS COR||34.9%||25.3%||30.1%|
|UTX||UNITED TECHNOLOGIES CORP||12.4%||20.3%||16.3%|
|MDLZ||MONDELEZ INTL INC||4.1%||17.3%||10.7%|
|QSR||RESTAURANT BRANDS INTL INC||-2.7%||17.5%||7.4%|
Platform Specialty Products Corporation (NYSE: PAH) appears to be the most undervalued stock in the fund. The company has a blended upside of 30.1% relative to its current trading price. Value investors may want to take a deeper dive into the valuation of the company.
United Technologies Corporation (NYSE: UTX) appears to be the second most undervalued stock in the portfolio. The company’s blended upside of 16.3% is very intriguing. With 10.7% margin of safety, Mondelez International, Inc. (NASDAQ: MDLZ) is the third most attractively priced security.
Herbalife (NYSE: HLF). Valeant Pharmaceuticals (NYSE: VRX). Target (NYSE: TGT). These are just a few of the companies that activist investor Bill Ackman has muscled his way into, some of which have left him tattered and others have catapulted him to billionaire status.
When Ackman invests, he places billion-dollar bets on a handful of companies. This Indiana Jones approach has led to some bruising defeats, including a nearly $4 billion loss from a misplaced Valeant position. With rare humility, Ackman apologized to his investors for what he coughed up as a mistake.
One of Ackman’s most infamous bets was his multi-year $1 billion short position on weight loss and nutritional supplements play Herbalife, a position he abandoned amid the rise of the company’s stock despite Ackman’s cries of a pyramid scheme. Although Ackman and Pershing Square have struggled recently, the hedge fund does have a track record of producing strong returns for investors.
Managers with more than $100 million in qualifying assets under management are required to disclose their holdings to the SEC each quarter via 13F filings. Qualifying assets include long positions in U.S. equities and ADRs, call/put options, and convertible debt securities. Shorts, cash positions, foreign investments and other assets are not included. It is important to note that these filings are due 45 days after the quarter end date. Therefore, Pershing Square’s holdings above represent positions held as of March 31st and not necessarily reflective of the fund’s current stock holdings.
However, most can agree that with thousands of stocks traded on U.S. exchanges, doing thorough research on each one is nearly impossible for smaller investors. Leveraging the resources of the largest hedge funds on Wall Street can be a powerful way to narrow down the list.
The ideas section of finbox.io tracks top investors and trending investment themes. You can get the latest data on the holdings discussed above at the Pershing Square page.
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.