The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.
Hedge fund manager Bill Ackman is having a rough year. But don't shed too many tears for him ... not that you probably would anyway, given that he's a billionaire and all.
Yes, Ackman's Herbalife (HLF) short may turn out to be one of the worst bearish bets in history. Herbalife's stock has doubled so far in 2013. Making matters worse, he had to endure a vitriolic personal attack on CNBC by fellow activist investor Carl Icahn.
And yes, his investment in J.C. Penney (JCP) has been a complete disaster. Ackman said Tuesday he's resigning from the struggling retailer's board. He may not have thrown in the towel on JCP just yet. (That would require him selling his stake.) But he's definitely waving it ... with good reason. JCP is down 35% this year after a more than 40% plunge last year.
Many other high profile stocks that were losers last year, such as Best Buy (BBY), Hewlett-Packard (HPQ), Electronic Arts (EA) and Xerox (XRX) have gone from zeros in 2012 to heroes this year. So it's all the more embarrassing that JCP has not joined the list of those comeback stocks.
The JCP meltdown is even worse when you consider that Ackman supported both the hiring of former Apple (AAPL) retail honcho Ron Johnson to lead JCP, and his subsequent firing, and then publicly demanded last week that the company hire yet another new CEO. It seems safe to say that Ackman's activism at JCP has been nothing short of a train wreck.
But here's where the Ackman narrative improves. He may have gone off the rails with his Herbalife and J.C. Penney bets. But you may be surprised to hear that Ackman's biggest investment (at least from a long perspective) is a train company that has done ridiculously well: Canadian Pacific (CP).
Ackman's Pershing Square Capital Management bought a more than 12% stake in Canadian Pacific back in the fall of 2011. He battled with the company's board and ultimately succeeded in ousting its CEO. Investors have been handsomely rewarded -- and then some.
Shares of Canadian Pacific were trading around $45 when he first purchased the stake. They are now around $122. As a result of the stock's nearly tripling, Ackman disclosed in June that he's going to sell a chunk of his stake over the next six to twelve months to take in some profits.
This should serve as a reminder that even though Ackman has some notable flops this year, he still deserves some respect from investors and traders.
After all, Ackman also has done quite nicely with his stake in consumer products giant Procter & Gamble (PG). He acquired his stake in the second quarter of 2012, when P&G was trading in the mid-$60s. P&G is Pershing's second-largest holding.
Since then, P&G CEO Bob McDonald announced an early retirement. Ackman was highly critical of McDonald. P&G's stock? It's now trading at about $82.
Ackman also successfully pushed conglomerate Fortune Brands to split into two companies back in 2011: one for its kitchen and bath furnishing and Master Lock units, and one for its alcoholic beverage business. Ackman no longer owns the former: Fortune Brands Home & Security (FBHS). But he does still own the latter: Beam (BEAM). And Beam shares are up nearly 50% since the split.
Still, investors seem to think that Ackman's best days are behind him. When he disclosed at the end of July that he bought a nearly 10% stake in specialty gas company Air Products and Chemicals (APD), the stock rose that day ... but has since fallen 5%.
Ackman is a very easy target right now. And I can't stress enough how silly he looks for his solitary crusade against Herbalife and for his waffling on JCP.
But Ackman's no dummy. His track record -- even if you throw in his botched plan to shake up Target (TGT) and ill-timed bet on Borders a few years ago -- is still pretty strong over the long haul. So counting him out because of two bad (even colossally bad) investments this year might not be the smartest thing to do either.
This article was published in the July issue of Money magazine.
You may think it's crazy to buy shares of companies that have a lot of people betting against them. Yet isn't that the very essence of contrarian investing?
Several stocks that have been recent targets of short-sellers -- investors who borrow shares and sell them, hoping to buy them back later at lower prices -- have been some of Wall Street's big winners MOREPaul R. La Monica - Jun 19, 2013 9:20 AM ET
KPMG has resigned as auditor of Herbalife and Skechers after learning that a senior partner in its Los Angeles office had allegedly provided insider information about the companies to an outside party, who traded on the information.
KPMG declined to comment about the companies' identities. Both Herbalife and Skechers confirmed the news in statements.
Shares of Herbalife (HLF), which had been halted since just before the market opened, slid MOREHibah Yousuf - Apr 9, 2013 3:45 PM ET
Shares of Herbalife jumped Thursday after the nutritional supplement company said billionaire investor Carl Icahn will be allowed to nominate two board members.
Herbalife (HLF) shares ended the day up 7%. The stock was briefly halted on the news.
Under the terms of a deal with Icahn's holding company, Herbalife agreed to have Icahn nominate two members to the company's board, which will grow to 11 directors. The new board members will MOREBen Rooney - Feb 28, 2013 4:39 PM ET
JC Penney's latest tangle has many folks speculating about whether there's another hedge fund battle brewing.
The retailer said it received a Notice of Default from law firm Brown Rudnick, which claims to represent an "ad hoc" group who hold more than 50% of JC Penney's bonds due in 2037.
JC Penney says the notice is "utterly without merit" but it's raised speculation as to who is behind this so-called ad hoc MORECatherine Tymkiw - Feb 5, 2013 12:33 PM ET
Shares of Herbalife (HLF) bounce back from a sharp drop Monday morning after the New York Post reported that the company is the subject of a federal investigation. Herbalife's stock fell nearly 13% shortly after the open but finished the day up more than 1%.
The investigation was revealed after the Federal Trade Commission disclosed a list of 192 complaints against Herbalife from the past seven years in response to a Freedom of Information Law request MOREHibah Yousuf - Feb 4, 2013 4:01 PM ET
Super Carl? Activist Carl Icahn has been racking up some pretty big wins in the past few weeks. Now, add Chesapeake Energy (CHK) to that list.
Chesapeake Energy's stock is up more than 6% Wednesday, following the company's announcement that its controversial CEO and founder Aubrey McClendon would step down immediately and retire on April 1, 2013.
Icahn was a key force behind McClendon's ouster. Early last year, investors discovered that MOREMaureen Farrell - Jan 30, 2013 12:43 PM ET
Hedge fund titans Bill Ackman and Carl Icahn squared off over Herbalife (HLF) Friday afternoon. And it was like a scene from a kindergarten playground.
For 30 minutes, the two lobbed insults at each other on CNBC as Ackman's bet on Herbalife's stock falling to zero drew the ire (and a litany of insults) from Icahn.
After listening to the confrontation, the public now knows a few things about these two.
For one, MOREMaureen Farrell - Jan 25, 2013 3:30 PM ET
It's Herbalife's turn.
As hedge fund titans Bill Ackman and Dan Loeb square off over the company's sales practices, the company's top executives played defense.
"We are confident that you will see that we're a legitimate company with legitimate customers," Herbalife CEO Michael Johnson told investors and analysts gathered at the Four Seasons in midtown Manhattan Thursday. Johnson called the opportunity to address the crowd "unusual but incredible."
Ackman, who runs Pershing MOREMaureen Farrell - Jan 10, 2013 10:31 AM ET
Hedge fund manager Bill Ackman outlined why he and his team of analysts have dubbed the nutritional supplement company Herbalife (HLF) as a "pyramid scheme" at a conference in New York Thursday morning.
Herbalife's stock dropped nearly 4% Thursday, its second straight day of sharp drops. The vitamin maker's stock dropped more than 12% Wednesday, after CNBC reported that Ackman had been betting against the stock for most of 2012. MOREMaureen Farrell - Dec 20, 2012 12:52 PM ET
Not a member yet?Sign up now for a free account
|2 million Facebook, Gmail and Twitter passwords stolen in massive hack|
|Ron Paul: Bitcoin could 'destroy the dollar'|
|Pentagon to cut jobs, contracts by $1 billion|
|A new normal for government retirees|
|Top 10 U.S. cities for Chinese homebuyers|