Three Activist Targets of Bill Ackman That Are Also Seeing Insider Buying

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Mar 24, 2015

Bill Ackman (Trades, Portfolio) has one of the best investing track records in the world. He is known for his activist approach. He buys the common stocks of public companies and pushes for changes so that the market can realize the values of the companies. Ackman buys stocks trading at a discount and sells when the companies reach their appraised value.

The following is a list of three of his holdings which are also seeing insider buying activity from their top management.

Company Name Number of Shares Held - December 31, 2014
Air Products & Chemicals Inc (APD, Financial) 20549076
Platform Specialty Products Corp (PAH, Financial) 42737394
Restaurant Brands International Inc (QSR, Financial) 38003984

Here's a look at these companies in detail.

Air Products and Chemicals (APD, Financial)

Air Products has a portfolio of products that includes atmospheric gases, process and specialty gases, performance materials, equipment, and services.

Air Products is trading at 20.71 times FY2016 (September) earnings estimates. The company's EPS is expected to grow 12.45% in the current year and 12.92% next year. Out of 21 analysts covering the company, six are bullish and have buy recommendations, 13 have hold ratings, and two have sell ratings.

The company's newly appointed CEO Seifi Ghasemi has bought a total of 105,000 shares of the company since August last year.

Air Products used to have an operating margin of around 13% when Bill Ackman (Trades, Portfolio) initiated his position. His key argument was that with a right management and processes in place, the company can post margins in line with its peer Praxair (PX, Financial). Praxair posted operating margin of 22% in FY2013 which was 900 bps higher than Air Products during the same period. This means if Bill Ackman (Trades, Portfolio)'s argument is true, there is a substantial margin upside for the company.

The company is executing well under the guidance of its new CEO. The company increased its EBITDA margins by 240 basis points last quarter and earnings per share for the quarter increased 16% versus last year. Going forward, the company remains focused on becoming the safest and most profitable industrial gas company in the world.

Platform Specialty Products (PAH, Financial)

Platform is a global producer of high-technology specialty chemical products and provider of technical services.

Platform Specialty Products is trading at a forward PE of 16.50. Its EPS forecast is $1.10 for the current year and $1.57 for next year. According to the consensus estimates, its topline is expected to grow 232.80% current year and 8.60% next year. Out of two analysts covering the company, one is bullish and has a buy recommendations and one has a sell rating.

The company's directors, Martin E Franklin and Stanley E O'Neal, have bought 250,000 shares and 77,601 shares, respectively, in the company since November last year.

In the fourth quarter of 2014, Platform closed its acquisitions of the Agriphar Group and Chemtura AgroSolutions and announced its acquisition of Arysta LifeScience. These acquisitions will be immediately cash accretive for the company. I believe integration of these acquisitions will be a major focus of the company in FY2015. The company's reasonable valuations and insider buying is a positive sign for the investors.

Restaurant Brands International  (QSR, Financial)

Restaurant Brands International is a Canadian corporation originally formed on August 25, 2014 to serve as the indirect holding company for Burger King Worldwide and its consolidated subsidiaries and for Tim Hortons and its consolidated subsidiaries. It is one of the world’s largest quick service restaurant companies with over 19,000 restaurants in approximately 100 countries and U.S. territories as of December 31, 2014.

Restaurant Brands International is trading at a forward PE of 31.25 and has a dividend yield of 0.90%. Its EPS forecast for the current year is $1.00 and next year is $1.25. According to the consensus estimates, its topline is expected to grow 7.40% next year.

The company's Directors Lederer John Anthony and Thomas V Milroy have bought 20,000 and 10,000 shares of the company respectively in February this year.

Recently, Citi analysts published a report raising their target price for Restaurant Brands to $49. Here is the excerpt from the report,

Overall, we believe current valuation for QSR doesn't fully reflect the international growth potential of the THI brand or possible cost savings of the combined company. We believe that Restaurant Brands International deserves to trade at a slight premium (5%) to other asset-light peers given the likelihood of a rapid ramp in international expansion and the potential for a significant cost savings at Tim Hortons, offset by a lack of clarity surrounding management's targets or expansion plans.

Applying a 5% premium (no change) to the current average EV/EBITDA multiple of approximately 19x (previously 17.3x) for QSR's asset-light peers yields a target multiple of 19.9x (previously 18.2x). Applying our 19.9x (previously 18.2x) target multiple to our CY16 EBITDA estimate of $1.74bn (previously $1.84B) and subtracting out net debt and preferred stock results in a $49 (previously $46) price target.