 Good day, fellow investors. Bill Ackman, the man famous for wrongly shorting Herbalife and then getting into a fight with Carl Eichmann, has been in a great year and the Pershing Square Capital Management yearly presentation has come out with two very interesting stocks that he regards as strong buys over the next year and in this video I will discuss Pershing Square, how he invests his past very good returns, he's an active investor so he buys something, tries to get to the port, tries to change what's going on and if he does the work for you, you can buy the stock now and then see how that fits your portfolio. I did this research to learn, always I like to follow great investors and I'll try to do such a video every Sunday when we discuss a stock, analyze and it will be a great learning opportunity and perhaps give you some great ideas on stocks to buy to improve your portfolio. So please subscribe and click that notification bell. Let's immediately dig into the content, I'll discuss Pershing Square, Agilent Technologies and Berkshire Hathaway which are the two stocks and the third always you can buy Pershing Square if you want Bill Ackman to do the work for you. I'll discuss that to give first perspective Pershing Square, Agilent and in-depth analysis and then a commentary on Berkshire and why Bill Ackman thinks it's a buy and Berkshire Buffett always a buy. Let's start with Pershing Square, a fund so launched its private fund in 2012. He was prior previously also a manager at Gotham Capital, etc. But then listed 2014 on Amsterdam Stock Exchange. They take some loans didn't do really well over the past year since the listing, but the situation has really improved in 2019 where they out performed the market by delivering 58%. As I said, he's an activist investor, so he buys things that he thinks are undervalued, goes in, tries to improve the management, tries to improve things and then reach long term returns for now with ups and downs with a big hit when he shorted Herbalife and now he's coming back to his fame and what he did in the past, he really did beat the SAP500 since 2004 and you can buy Pershing if you want him to work for you. There are some fees related to that, but his return annual return is 14.3% since its inception, more volatile than the SAP500, but still better than the SAP500 since 2004. This is the portfolio, biggest contributor, so Chip Potle, he has been really included there in the management, changing the management and did really well over last year, Hilton Worldwide and he's discussing them, but we are going to discuss Agilent Technologies and Berkshire headways that were reported as buys from his recent presentation. This is all public stuff. If you go to Pershing Square, you can find these presentations that I'll use to make a better video. So let's start Berkshire and Agilent. They exited Starbucks, ADP United Technologies because they think they are overvalued now. So also interesting to follow how they approach this investing strategy. Let's immediately dig into Agilent. So it's a leading analytical measurement company. Healthcare, quality, food, molecular properties, chemical, so it's a chemical company that makes those products that enable testing of things. It's very attractive because it has a razor slash razor blade business model, which is that they sell the instrument, but then again, they have recurring sales for servicing additional products related to the product and therefore it's difficult to switch to something else. Five billion of revenue across more than 60,000 customers. And there is an average organic growth of 6% over the last decade as the market for such instruments is growing. Let's go to the investment thesis. It has a mode because it's a market leader in an oligopolistic industry and it's actually difficult to make such products. And once you have it, you stick to it. So low switching because of high switching costs and it's difficult for low cost players to provide competitive offerings. So it has a mode plus the world is growing. There is development, more and more chemical things, more and more sanitation checks, health care checks, more and more environment checks. Thus, the market is growing, which means there is a tailwind. They have high degree of recurring revenue and resilient profit stream, which means high return on investment capital. So as they invest, they scale what they have across the globe. They get higher return on capital, which is very important when investing. And then future margin expansion alongside a tailwind that we already mentioned, which means growth in earnings, especially now that Bill Ackman will probably be more involved. And what they estimate is an 800 basis point. So add eight percentage points of margin opportunity, margin increase. And we'll later see how that will probably double earnings and free cash flows. And when earnings and free cash flows double, we have dividends that double and you know what happens then to the stock price. It at least doubles. And that's what Bill Ackman is focusing here. However, he has 10, 15 companies. Not all will succeed. So you have to see how this fits your investment portfolio. Then there is an again, the balance sheet is not levered as others are. With cheap money, it is smart perhaps to take more leverage, give more money to shareholders or make bold acquisitions that improve long term earnings. So really net debt to long last 12 months, EBITDA is just 0.8 compared to others that have it above 2.5. So there are a few billions and that's 10, that's a 10, 15 percent of the company that can be returned to investors and make it more a lean investing friendly machine. So when we look directly at what they are doing, they are globally diversified instruments and services, services as they sell more instruments make more and more of their revenue stream. Analytical laboratory is their market. And then there is growth. They recently make an acquisitions. So analyze various chemicals, molecules, chromatography and mass spectrometry tools. So if you are in the market, you know what they are and where they are, which is very, very interesting. Plus, let's see more in detail on the margin expansion. So 2014, there was a spin off. So let's look from 2015 onwards. And we see growth 20 percent over five years. So a few percentages here and there. Line one, line two gross margins is very important. 50 percent in 2015, 54 percent now. And Bill Ackman predicts another eight basis points on that. If I add eight basis points on that, since it was 50 to 54, it added 500 million to operating income. If I increase another eight basis points, it will add more than a billion to operating income, keeping the same costs. Does net income will probably double cash flows that have doubled also since 2015 from 400 million, line four to 900 million will probably also double and suddenly a company with a market cap of 26 billion will have not one billion, but two billion in cash flows to deploy, which would be a great win, more dividends and then also future growth based on the tailwind of economic development, India, China, Asia and then more health care in Europe, etc. You see how where the story here is. And that's why Bill Ackman thinks that at the current price earnings ratio, this is under value. There is a yield buyback plus dividend yield of 3.53 percent. If that doubles, if that goes to 7 percent, if they improve margins, grow, they made an acquisition, scale on that, then you know what happens to the stock price. On the balance sheet, they made a 1.3 billion acquisition and the long term debt didn't budge. They took a short term debt loan to do that, but they spent probably a billion and more on from their own cash. And that's something that also Bill Ackman doesn't like because they could have taken a loan, cheap loan given the low interest rates now and then distribute that cash in a better way. So they will try to leverage this company a little bit more to pay more dividends. This is a risk, but if the business model is resilient, if people need to have recurring purchases of their products, then even a recession might slow down some sales, but over the long term demand might grow. However, there are also risks. They are selling new equipment. As I said, in the case of recession, lowered health care cost in the U.S., lower spending on health care, unlikely but possible, and then the positive is always the global growth in diagnostics, tailwind alongside economic growth, health, unfortunately with the coronavirus that we discussed on the Friday news. So the conclusion, I think net profit could be increased 1 billion from better margins and growth over time. They could push debt higher. So the company could find itself distributing 1.5 billion per year, which is 7, 8% yield to investors, which means that the stock price has the potential to double. The P ratio is in line with the SAP 500. If we look, if this company will beat the SAP 500, let's say 5% organic growth, some mergers and acquisitions, improved margins, so 10% growth in free cash flow over the next years on the same ratio as the SAP 500, this could outperform the SAP 500. Remember, Bill Ackman is a relative investor. He wants to beat the SAP 500. So he is invested. He doesn't look at the absolute return here, which is 4% now with 10% growth based on the price earnings ratio. If things go well. This is, I think, normally stock that can beat the market. So if you're looking for a portfolio that can beat the market, it's very, very interesting. I like to look at it. I don't know whether I'm going to invest in it, probably not because I have price earnings ratios in the teens, in the tense, with much better growth prospects. So from an absolute perspective, I think I can find better. But it was an interesting thing to look at. Now, Berkshire, his second pick, price earnings ratio 20, but take into account that there are 124 billion of cash. So deduct that from the market capitalization. So it's even cheaper. 15 is the price earnings ratio. Recently did a video on Berkshire. You might want to watch that if you are interested in this. But the thesis is pretty simple. There is margin expansion potential with GEICO, with Burlington, Northern Santa Fe. So a lot of cash likely to be deployed in share repurchases because the book value is close to 1.3 and Warren Buffett and Charlie Munger said that they will, if the book value goes down, they will really push on repurchases of Berkshire. And perhaps I'm thinking with 120 billion when there will be the next crisis in insurance and there will come the crisis. They will simply pick up whatever is left of those big insurers and that they will do it on the very, very cheap. And then it will be again, another stroke of genius. Now everybody is trashing Warren Buffett for keeping the money. But trust me, when he pulls the trigger on those 100 billion, he can buy half the insuring world when the insuring world gets into trouble, when interest rates change, etc. And he has the balance sheet to lever that. So it's not stupid. I think he knows what they are doing. They know really well what they are doing. And it will again improve, beat the SAP 500 over the long term because the price earnings ratio is lower. It's related to the American economy, global economy. And then you have a margin of safety because you have great management, great investment principles, managing your money. And you even have a protection, a put option with the 20% in cash. So this was the analysis. Please subscribe. Leave your comments below with stocks that are interesting. You want me to analyze, I always want to read your comments. There can be a nice discussion in the comments. So click like if you like this video. Subscribe, click that notification bell and I'll see you in the next video.