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The Morning Brief: Pershing Square Exits One of its Long Time Holdings
Bill Ackman’s Pershing Square Capital Management has fully exited Zoetis, the animal health products giant. The activist tells clients in its third-quarter letter that it sold its last shares on November 9, about two years after it disclosed an 8.5 percent stake in the company, paying an average of $37 per share.
“Despite the high quality nature of the business and its strong management team, we sold to redeploy the capital in certain new investments,” the hedge fund firm states. In February 2015 Zoetis agreed to add two individuals to its board of directors, including then-Pershing Square investment team member William Doyle. The hedge fund firm says it generated a 58 percent total return on its investment in Zoetis.
Earlier, Pershing Square said it sold its remaining 9.8 million shares of Canadian Pacific Railway Limited (CP) in early August, five years after making its initial investment in the stock. Pershing Square says the stock nearly quadrupled during its holding period as the company boosted its operating performance and credit rating.
Tiger Global Management participated in the $80 million Series D financing of Nubank, a Brazilian provider of a credit card for smart phones. This is the New York hedge fund and venture capital firm’s third investment in the company. It is also Tiger Global’s first reported venture capital investment since August.
Credit Suisse raised its price target on hedge fund favorite Allison Transmission from $31 to $40 after hosting meetings with the company’s management. In a note to clients, the investment bank asserts that cash flow at the maker of fully automatic transmissions for commercial vehicles should continue to be strong even though it is expected to exhaust its net operating loss write-offs by year-end.
“More importantly, we believe returning cash to shareholders, via dividend and share repurchase, remains high on management’s priority list,” it adds. Last month, the company announced a new $1 billion stock repurchase program. The company said at the time it expected to complete its current $500 million stock repurchase by the end of the year.
Allison said it decided to launch the new program after consulting with several stockholders, among them Ashe Capital Management, Longview Asset Management, and ValueAct Capital Management. ValueAct, led by Jeffrey Ubben, is the largest investor, with about 11.4 percent of the company’s shares. Other major hedge fund holders include D.E. Shaw & Co. and Farallon Capital Management. The stock rose slightly to close at $35 on Thursday.
Go figure. Shares of Sears Holdings surged more than 5 percent, to close at $12.76, despite the retailer reporting some bad news on Thursday. First, the struggling company posted a $748 million loss for the third quarter, much wider than the $454 million loss reported for the third quarter last year. And as usual same store sales fell for both Sears and Kmart stores. Eddie Lampert and his Bay Harbor, Florida-based hedge fund firm ESL Investments combined own 54.8 percent of the shares.
Shares of hedge fund favorite Horizon Pharma slumped 22.5 percent, to close at $15.03, after a late-stage trial for a high-profile nervous system drug failed. It is the third largest U.S. long position held by Kingdon Capital Management, the company’s fourth-largest shareholder, and the third-largest position of Deerfield Management, the fifth-largest shareholder.
The HFRI Fund Weighted Composite Index rose 0.9 percent in November, bringing its gain for the year to 4.6 percent. This was the eighth profitable month in the past nine months. Event-driven funds led the way among major strategies, jumping 2.2 percent last month. They are now up, on average, by 9.4 percent for the year.