market folly

Bill Ackman's hedge fund firm Pershing Square is out with its semi-annual report and second quarter letter.  Year to date through July 2015, Pershing Square Holdings was up 10.1% net.  This obviously doesn't include the volatility in August and they note they were down for the year as of recent activity, but still outperforming the indices.


Pershing's Thesis on Mondelez

Ackman's letter provides an update on their new position in Mondelez (MDLZ), writing

"We believe that now is an attractive time to invest in Mondelez because its profit margins are just beginning to expand after several years of limited improvement.  In addition, we believe that 3G Capital, through its ownership of Hertz, and now Kraft, has established new benchmarks for operational efficiency, organizational design and management alignment which have allowed 3G companies to be more profitable, nimbler, and better positioned to grow over the long-term.  We believe that 3G's higher standards for operating performance will catalyze a competitive response in the packaged foods industry, leading to greater operating margins and profitability for Mondelez and other companies in the industry."


Pershing's New Position in Nomad Foods

The firm also talked about their new purchase of Nomad Foods (NHL).  They purchased $350 million in a private placement of Nomad's common stock during its acquisition of Iglo Group in June, giving them a 22% ownership stake. 

Nomad is a specialty purpose acquisition company (SPAC) sponsored by Martin Franklin and Noam Gottesman.  Pershing has worked with Martin before in a previous SPAC (Justice Holdings) that then became Burger King (now known as Restaurant Brands).

The thesis here is a consolidation play as they believe Iglo is a platform investment to then acquire more of the packaged food industry.

Pershing writes,

"Iglo is the leading branded frozen food business in Europe with euro 1.5 billion in sales. It is a stable, high margin (20% EBITDA margin), free-cash-flow-generative business.  It has a leading share in European frozen foods at 2.2 times the size of the next largest competitor, with strong brand equity.  Historical growth in the business has been flat, but management sees opportunity for organic growth by expanding the company's great brand names into adjacent frozen food categories."


In its letter, Pershing also provides updates on Valeant Pharmaceuticals (VRX), Air Products and Chemicals (APD), Canadian Pacific (CP), Zoetis (ZTS), Restaurant Brands (QSR), their short of Herbalife (HLF), Fannie Mae/Freddie Mac (FMCC), and.


Embedded below is Pershing Square's semi-annual report / Q2 letter:



You can download a .pdf copy here.

For more on this firm, head to Bill Ackman's presentation at the Delivering Alpha conference.