Contrarian Corpus
activist full deck follow up
2016-04-26 · 82 pages

Multiple (portfolio-level LP update: MDLZ, APD, ZTS, QSR, CP, HHC, VRX, PAH, FNMA/FMCC, NOMD, HLF)

N 3 Narrative
V 3 Visual
C 3 Craft
Original source ↗

The three reasons

  1. 1

    Mondelez margin gap to peers (13% vs 17-26%) implies +600-700bps of optimized EBIT upside

  2. 2

    Valeant is stabilizable: new CEO Papa, board refresh, ad hoc review done — 83% drawdown overshot

  3. 3

    Herbalife is a pyramid scheme: pyramid has stopped growing, FTC action appears forthcoming

Primary demands

  • Mondelez: adopt 3G-style zero-based budgeting to close margin gap vs packaged food peers
  • Valeant: install new CEO (Joe Papa), add independent directors, stabilize company after 83% decline
  • Herbalife: regulatory shutdown of alleged pyramid scheme via FTC action
  • Zoetis: continue cost structure initiative and board engagement to lift operating margins

KPIs cited

Mondelez CY2015 EBIT margin
13.1% vs Kraft Heinz 26.5%, Hershey 20.0%, peer median ~17%
Heinz gross margin under 3G
+600bps consolidated (36%→42%) and +1,100bps Europe (38%→49%) in 2 years
Mondelez SKU reduction
~74,000 in 2013 to ~30,000 in 2015, supplier base 100k→60k
MDLZ 2018 EBIT margin target
17-18% (mgmt) vs Pershing-estimated optimized ~20%+
Air Products operating margin
expanded from 15% pre-investment to 22% most recent quarter
Zoetis cost program
$300mm savings targeted; operating margin 25% (2014) → ~34% (2017)
CP operating ratio
Q1 2016 record 58.9% OR; management targeting mid-50s long-term
Valeant drawdown
83% decline from average cost of $196 to ~$33 by April 2016
PSH Q1 2016 net returns
-25.6% vs S&P 500 +1.3%; YTD -16.8%
Herbalife top 1% earnings concentration
89% of all 2015 earnings captured by top 1%; 86% of members received $0
Herbalife membership growth
Gross new members declined YoY in 2015 (2.24mm→2.08mm); total base flatlined at 4.0mm
HHC run-rate NOI
~$43mm in 2010 to expected $219m upon stabilization in 2019

Pattern membership

Where this document fits across the library's 12 rhetorical / structural patterns.

Notable slides (9)

Notes

Pershing Square's 2016 European Investor Meeting — a fund-level LP update covering the entire portfolio rather than a single-target thesis. Structure: fund performance (Q1 -25.6%), then per-position deep-dives on 11 holdings (MDLZ, APD, ZTS, QSR, CP, HHC, VRX, PAH, FNMA/FMCC, NOMD, HLF short), then PSH capital structure and team update. Each position gets 3-8 slides with bull-case + annotated share-price chart. Herbalife section is the most polemical — uses quoted CEO Michael Johnson statement about recruiting being 'the most vital part of our bloodstream' as contradiction to retail-sales defense, and includes pyramid-growth charts. Mondelez section (pp. 11-21) is the strongest peer-gap argument with the 10-peer EBIT margin bar chart (p. 14) and 3G Heinz case study (p. 18). Valeant section (pp. 44-50) is de facto crisis-management communication post-March 15 collapse rather than a thesis pitch. Campaign phase = follow_up because most positions are multi-year follow-ons rather than initial theses. Visuals are standard institutional Pershing template (blue headers, simple tables/bars) — clean but not editorial-tier. No explicit sum-of-parts table though HHC discussion is asset-based.