United Technologies (UTX) has been another key contributor to Pershing Square’s success YTD (year-to-date).
Compared to its average cost for Pershing upon Pershing’s initial investment, UTX fell 16% in 2018, underperforming the broader markets (SPY) (DIA). Things, however, have been turning around for UTX, which has soared 16% YTD.
Dan Loeb exits United Technologies
Another high profile fund, Dan Loeb’s Third Point, also had a stake in UTX, which it exited in the fourth quarter. Loeb was pushing UTX to split into three separate businesses. In November 2018, UTX’s chair finally announced the split. The company’s rival General Electric (GE) is also splitting up to unlock its full value.
Ackman is positive on United Technologies
Bill Ackman is positive on UTX. According to a recent presentation by Pershing Square, “Upcoming business separation should be a catalyst for significant share price appreciation.” Ackman also believes that the company is “significantly undervalued relative to peers and intrinsic value.” According to Pershing’s estimates, the current sum of UTX’s parts implies a discount of 30%.
Another important catalyst for UTX could be a trade deal between the United States (IVV) and China (FXI). The conflict between the countries has been weighing on industrial stocks (XLI), including Honeywell (HON), the 3M Company (MMM), and Textron (TXT).