Contrarian Corpus
activist full deck follow up
2015-01-29 · 81 pages

Multiple (Pershing Square portfolio - annual update)

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

The three reasons

  1. 1

    2014 net returns of 40.4% vs S&P 500's 13.7%, driven by Allergan (+19.1%), CP (+7.0%), and Herbalife short (+6.1%)

  2. 2

    Permanent-capital IPO of PSH raised $2.8bn, lengthening duration to pursue long-dated activist campaigns

  3. 3

    Portfolio companies delivering operational inflections: APD margins, CP operating ratio, BKW/Tim Hortons merger

Primary demands

  • Allergan: force sale/merger via unsolicited Valeant bid and board change
  • Air Products: CEO change (Seifi Ghasemi) and margin expansion to Praxair-level 22.5% EBIT
  • Canadian Pacific: continue Hunter Harrison operational transformation toward 58-63% operating ratio
  • Herbalife (short): expose as pyramid scheme and pursue regulatory action
  • Zoetis: drive value at animal-health pure-play (10.1% combined Pershing/Sachem Head 13D stake)
  • Fannie/Freddie: reverse Treasury net worth sweep via litigation

KPIs cited

2014 net return (PSH)
40.4% vs S&P 500 13.7%
Cumulative net return since 2004 inception
696.2% vs S&P 500 132.1%
Average monthly return
Pershing Square 1.7% vs S&P 500 0.7%
Total firm AUM
$18.3bn as of 12/31/2014
Permanent capital share
36.2% of AUM, 46% incl. GP/affiliates
Air Products EBIT margin
16% current, target ~22.5% in line with Praxair
Canadian Pacific Operating Ratio
64.7% in 2014, target 58-63% by 2018
CP EPS growth
+32% in 2014; guidance 25%+ for 2015; $17/sh target
Allergan stock appreciation
+80% incl. dividends from $125 entry to $224 (Jan 2015)
Herbalife volume points YoY growth
0% worldwide Q3'14 vs 13% Q3'13 (-12pp)
Herbalife stock decline from short inception
-41% incl. dividends since 5/1/2012
APD share price since Pershing Square inception
+57% incl. dividends since 5/22/2013

Pattern membership

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

Notable slides (8)

Notes

Firm-level annual investor update rather than a single-thesis deck - runs through each 2014 portfolio position (Allergan, Herbalife short, APD, CP, Restaurant Brands/BKW, Platform Specialty, Zoetis, HHC, Fannie/Freddie) plus exited positions (Beam, GGP, P&G). Opens with fund performance (40.4% 2014 net return) and PSH permanent-capital IPO story, then position updates. Notable slides: p6 cumulative returns chart, p8 winners/losers attribution table, p27 Allergan event-annotated price chart, p29 'Herbalife: It's a Pyramid Scheme' with Gratziani 'inauthenticity' CEO quote, p31 HLF 2014 timeline of regulatory events, p36 APD thesis with 16%->22% EBIT peer gap, p40 APD share price since 13D with event callouts, p45 CP share price since 2011 Pershing 13D (+384%). Rhetoric is mostly analytical (reporting) with adversarial edges on HLF (pyramid scheme framing) and Allergan Board (hostile/anti-shareholder framing). Tone shifts from collaborative (CP, APD, BKW, Zoetis, Platform) to litigious (HLF, GSEs, Allergan). Visual production is functional institutional style: blue/green/orange banner bars, standard Bloomberg-style stock charts with event callouts. No sum-of-parts. Best specimen value is probably the HLF section (pyramid scheme narrative construction) and Allergan timeline chart as examples of activist 'story-of-the-campaign' visualization.