Pershing Square (PS) has many favorable attributes but has limited upside potential due to its current valuation, RBC Capital Markets said in a Tuesday note initiating coverage of the company's stock.
The company's durable permanent capital base is a strength, with 96% of its fee-paying assets under management made up of capital locked in for the long term, with no potential impact from redemptions, RBC analysts said. This allows Pershing Square to be patient with investments and be opportunistic during market dislocations, the analysts said.
Pershing Square also has steady, recurring earnings driven mainly by management fees and preferred performance fees, the analysts said. They noted that preferred performance fees are potentially more predictable, not being driven by portfolio realizations.
Managing $31 billion in total assets, with $21 billion marked as fee-paying assets under management, and having only 44 employees, the company employs a lean, high-margin business model, the analysts said.
The company, led by notable investor Bill Ackman, has an experienced, aligned investment team with a long and successful track record, according to the note.
RBC initiated coverage of the company's stock at sector perform with a price target of $40.
Price: $36.81, Change: $+1.14, Percent Change: +3.20%